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KARACHI: Pakistan’s central bank announced on Wednesday it was keeping the interest rate unchanged at 11% despite a majority of the economists predicting a rate cut, with analysts linking the “cautious” approach to the government’s aim to ensure price stability amid a surge in energy prices.

The decision came as a surprise after the majority of Pakistan’s economists predicted a reduction of 100 basis points in the policy rate due to easing inflation in the country, which reached 3.2% in June.

The central bank kept its benchmark interest rate unchanged for a second consecutive time after slashing it by 1,100 basis points during the last year to keep inflation in check, which had surged to 38% in May 2023.

State Bank of Pakistan (SBP) Governor Jameel Ahmad said the decision was based on easing consumer prices as well as core inflation, which otherwise remains “static” but eased to 7.2% last month. However, an unexpected hike in energy prices had worsened the inflation outlook.

“The Monetary Policy Committee (MPC) met today and decided to maintain the current policy rate at 11%,” Ahmad said at a press briefing in Karachi after the MPC meeting.

“The inflation outlook has somewhat worsened in the wake of higher-than-anticipated adjustment in energy prices, especially gas tariffs,” the central bank said in a separate statement.

Economist Khaqan Najeed, Pakistan’s former finance adviser, said the central bank had chosen a “path of continued caution and vigilance,” which aimed to consolidate stability gains before stimulating growth through monetary easing.

“The mention of ‘somewhat worsened’ inflation outlook due to energy tariffs was a key justification for not easing [the monetary policy],” he said.

Sana Tawfik, head of research at the brokerage research firm Arif Habib Ltd., agreed.

“For now, they will keep the interest rate at 11%, stabilize it and see the impact of its previous rate cuts as well as how recent floods and energy prices translate into the economic indicators,” she told Arab News.

Tawfik said Pakistan’s rising imports and resulting pressure on its external account had also influenced the SBP to keep the policy rate unchanged.

“Going forward, it appears that the state bank will remain cautious and will have a wait-and-see approach to take its decisions according to the global economic developments,” she said.

Prime Minister Shehbaz Sharif’s government is attempting to revive Pakistan’s debt-ridden economy with the help of a $7 billion loan from the International Monetary Fund (IMF).

Mushtaq Khan, an economist who is also the founder of a boutique advisory named “Doctored Papers,” described the SBP’s decision to keep the interest rate unchanged as a “smart move.”

“The external sector will be more vulnerable in FY26, so it’s a cautious step as needed,” he said.

Ahmad said this year Pakistan would need to repay $25.9 billion in foreign debt, of which about $16 billion were in bilateral loans that would be rolled over while the remaining $10 billion would have to be repaid.

This includes $1.8 billion in Eurobonds that are maturing this year.

“Going forward, we will see no difficulty in our debt repayments,” he said, citing increasing remittances that he said would cross the $40 billion mark this year.

RIYADH: Education spending in ����ֱ�� increased by 3.6 percent in the week ending July 26, driving total point-of-sale transactions to SR11.87 billion ($3.16 billion), even as most other sectors saw declines. 

Total POS value remained above the $3 billion mark for the fifth consecutive week despite a 2.7 percent weekly drop, underscoring the resilience of consumer activity across the Kingdom, according to data from the Saudi Central Bank, also known as SAMA. 

The education sector recorded SR111.18 million in transaction value, with the number of transactions slipping 4.1 percent to 140,000, while overall POS transactions across all sectors declined 2.9 percent to 206.46 million. The hotels sector saw a 1.3 percent increase to SR291.07 million. 

On July 29, the Saudi Cabinet approved the new statistics law, enhancing the Kingdom’s POS reporting with more detailed retail market insights. This update introduces refined subcategories in POS data, improving transparency and supporting data-driven decision-making in line with Vision 2030. 

According to SAMA’s bulletin, the subcategory of books and stationery saw the largest decrease, dropping by 5.8 percent to SR98.11 million. Spending on airlines ranked next, dropping 5.6 percent to SR65.20 million. 

Food and beverages, the sector with the biggest share of total POS value, recorded a 1.8 percent decrease to SR1.70 billion, while the restaurants and cafes sector saw a 2.4 percent decrease, totaling SR1.55 billion and claiming the second-biggest share of this week’s POS. 

Spending on transportation ranked third despite a 2.2 percent decline to SR945.76 million. 

The top three categories accounted for approximately 35.3 percent of the week’s total spending, amounting to SR4.19 billion. 

The smallest decline was seen in spending on freight transport, postal and courier services which decreased by 0.9 percent to SR36.13 million, followed by expenditure on telecommunication, which saw a 1 percent dip to SR131.86 million. 

Geographically, Riyadh dominated POS transactions, with expenses in the capital reaching SR4.1 billion, a 2.7 percent decrease from the previous week.  

Jeddah followed closely with a 3.1 percent dip to SR1.70 billion, while Dammam ranked third, down 2.8 percent to SR566.81 million. 

Al-Jubail saw the smallest increase, inching up 0.6 percent to SR123.04 million, followed by Al-Baha with a 0.7 percent increase to SR76.12 million. 

Hail recorded 3.54 million deals in transaction volume, down 3.2 percent from the previous week, while Tabuk reached 3.93 million transactions, dropping 4.3 percent.