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Inflation will remain in the range of 8.5-9.5 pc: SBP cautioned

KARACHI: The State Bank of Pakistan (SBP) has issued its second quaterly report for the current fiscal year on Friday and cautioned that inflation would remain in the range of 8.5 to 9.5 per cent, ARY News has learnt.

The report also traced the recent comfort on the external side to an unanticipated $1.5 billion inflow into SBP’s reserves.

SBP's report said that “Along with dampening inflationary expectations for the remaining part of fiscal year 2013-14 (FY14), this has changed the market’s interest rate outlook.”

The government was not able to contain its borrowing from the SBP within the limit agreed with the IMF, it added.

The SBP expressed concern over Pakistan’s debt profile and said its composition had witnessed a sharp shift towards shortest tenor. “This exposes the government to increasing rollover and interest rate risks.”

According to the report, government borrowing from commercial banks also increased in the second quarter. It mobilised Rs188.1bn from commercial banks against a net retirement of Rs179.1bn in the first quarter.

The State Bank warned that despite some positive economic indicators fiscal deficit could be in the range of 6 to 7 per cent of GDP for the current financial year, even if the country received the coalition support fund and proceeds from 3G licence before July.

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