Pakistan holds steady on rates after fiscal tightening

KARACHI : Pakistan's central bank held its benchmark interest rate at 9.75per cent on Monday and signalled that borrowing costs would remain steady for now as recent tax increases were expected to curb demand and reduce the country's budget deficit.

He said a mid-year budget passed this month which ended exemptions on sales tax would reduce the fiscal deficit and moderate demand. Pakistan's finance minister has said the tax changes would raise $1.9 billion. The bank also cut its projection for gross domestic product for the 2022 financial year which ends on June 30 to about 4.5per cent from 5per cent previously.

The governor said that while headline inflation would continue to remain high"in the near-term" due to elevated global commodity prices, its momentum was slowing.

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