Pakistan's economy and monetary policy: Reuters

By Faisal Aziz

Reuters - Pakistan's central bank is scheduled to announce its monetary policy for October-November on Tuesday. Here are some facts about the State Bank of Pakistan's monetary policy and the economy.

* In the previous policy review on Aug. 15, the central bank cut its key policy rate by 100 basis points to 13 percent -- the second rate cut since January.

* As part of an understanding with the International Monetary Fund, the central bank also announced in August an interest rate corridor, with the policy rate serving as the "ceiling" and the "floor" set 300 basis points below that.

* The frequency of monetary policy reviews was also increased to six a year from four, which was also part of the IMF deal.

* Pakistan is being propped up with a $7.6 billion IMF loan running for two years that was agreed in November. The IMF increased the loan by $3.2 billion in July.

* GDP growth slid to 2 percent in 2008/09, about the same as population growth. The government expects growth of 3.3 percent in the fiscal year to the end of June 2010. The Asian Development Bank expects growth of 2 percent in 2009, rising to 3 percent in 2010.

* Steady improvements in key economic indicators have encouraged the central bank to cut rates and provide impetus for growth, but concern about the fiscal side and risks of growing price pressures have prevented a big expansionary policy.

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