THE preamble to the SBP Act 1956 envisages that the objectives of the monetary policy is regulating the monetary and credit system in the country, fostering growth in the national interest.

In view of its aforementioned objective, the State Bank of Pakistan announced the monetary policy on Jan 27 and raised the policy rate by 25 bps to 6 per cent.

The decision was taken for some very obvious reasons like potential negative impacts of devaluation of the rupee by 5pc, increasein oilpricesin theinternational market and possible economic implications of forthcoming political activity related to the next elections etc.

Furthermore, most global economies are adjusting themselves according to changing economic scenarios and, therefore, many central banks have started increasingtheirpolicy rates.This situation will mount pressure on the rupee that might eventually lead to competitiveness for our industry on the global scene.

Certain current KPIs of our economy are quite encouraging, e.g., high growth momentum in the construction industry, higher tax collections, proceeds from the issuance of Sukuk andEurobonds and positive news from the textile sector.

However, certain facts need to be considered carefully. For instance, we know that growing economies always lead to higher inflation in the early years of economic activity.

That said, economic experts project overall growth in GDP to approximately at 6pc. Thus, the government`s decision to increase the policy rate seems appropriate and timely to control the money supply in the country and to curb the expected wave of high inflation.

M. Iftikhar Masaud Lahore