Monetary policy of a country has a direct impact on the economic condition and growth as well. These policies determine the interest rates, exchange rates, rate of money supply and inflation rates in the country. It is important to note that monetary policy is crucial to economic activity and growth.
MONETARY POLICY OF PAKISTAN
Monetary policy of Pakistan changes frequently according to the decisions which are made by the central bank of Pakistan. The central bank is the key institution that has the power to make changes to the current monetary affairs. As Pakistan is facing many problems related to its economy and most importantly external debt. Changes in monetary policy can impact the ability of the state to service external payments and inflation rates.
Current monetary policy implementation has shown an increase in the inflationary rates from 3.5% in FY18 to 5.9% in FY19. The fluctuation is caused by both demand and supply-side factors. The imports have been decreased to 5.8% during FY19 from 26.3% during the same period last year. This indicates that Pakistan is going towards a stable trading system and hope for decreasing deficit. The country is also expecting an increase in the number of foreign flows which is a healthy indicator for the increment of foreign reserves of the country.