The MPC highlighted that despite falling inflation, core
inflation remains sticky, with near-term inflation likely to remain volatile.
Additionally, growth prospects have improved as reflected by
the recent uptick in high-frequency indicators, with the impact of the easing
beginning to unfold.
Improving business confidence and easing financial
conditions are expected to support economic growth. Accordingly, the MPC
expects the real GDP growth in FY25 to remain in the range of 2.5% to 3%.
On the external front, strong remittances and exports along
with favorable international commodity prices, are expected to keep current
account deficit below1% of GDP in FY25.
Resultantly, foreign exchange reserves held by SBP are
anticipated to exceed US$13 billion by end June 2025.
On the fiscal front, declining yields will lead to a
sizeable saving in interest payments on domestic debt compared to the budget
estimates. However, achieving the target for primary surplus will be
challenging.
The M2 growth has decelerated mainly due to drop in
Government borrowing. Meanwhile, credit to private sector has picked up as banks
have expedited lending to meet ADR thresholds by Dec’24.
Finally, factors contributing to the NCPI fall are likely to
continue, going forward.
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