Pakistan pauses rate cuts, but not likely for long

Withinfiation cooling, Pakistan's central bankhit pause on its multiple rounds of monetary easing that might have risked destabilising its currency or worsening the trade deficit.

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Economistssaidthe governmentshouldshiftits focustoimplementing economicreformsasinter- est rate cuts are not the elixir for growth, after the country’s central bank on Monday unexpectedly kept interest rates unchanged at I28.

“The rate cuts alone may not meet growth targets,” said Vaqar Ahmed, economist and team lead with Oxford Policy Management. “Theyneed tob complemented by prudent fiscal measures, such as tax reforms, energy sector viability and privatisation of state-owned enterprises, to en- courage private sector investment and prevent crowding out.” Thecentralbank’srateholdsnapped the largest easing cycle in the country’s history, disappointing some businesses burdened by high borrowing costs.

Economists had expected a cut on Monday, following a series of cuts totalling OOO basis points from a record high of 298 in June last year to revive the economy.

The economy, which grew 0.98 in the first quarter, is expected to gain momentum for the rest of the fiscal year, according to central bank chiefJameel Ahmad. Though first-quarter growth is well below its 2.5%-3.58 target for the year, the economy is not stalling.