KARACHI: The prime question in the financial sector is whether there will be any change in the monetary policy, which is sche dule d be announcedonAug22.

Speaking to Dawn, most financial analysts and bankers said the benchmark interest rate would be maintained at the currentlevel.

On July 7, the State Bank of Pakistan (SBP) raised the interest rate by 125 basis points to 15 per cent, saying the inflation remain on the higher side this ñscal year.

The Consumer Price Indexbased inflation surged to 24.9pc in July.

With this high interest rate, banks are satisfied with the investment in government papers that offer about 16pereturns,butthegovernment is carrying heavy loads of costly borrowing.

Since imports have dropped, which played a key role in increasing the revenue for the government in FY22, they will not yield revenue this year.

Imports have been officially restricted in order to improve the situation with the twin deficits of trade and current account.

The recent trade numbers show that the country`s trade deficit shrank by 18pc yearon-year and 47pc month-onmonth during July FY23, mainly on the back of a decline in imports.

Some financial analysts believe that with the measures taken by the authorities to curb imports, along with a decline in international commodity prices, the current account deficit is likely to remain lower in FY23.

The high policy rate of 15pc is enough to slow the economy, which grew at a rate of about 6pc in FY22.

With a 15pc interest rate, banks charge their clients between 20pc and 25pc, depending on the risks associated with the loans being extended. Clearly, the outflow of money towards the economy will be reducedand ultimately reduce inflation as long as we have economic growth.

In its report issued on Saturday, Tahir Abbas, head of research at Arif Habib, said, `The rates on EFS (export finance scheme) and LTFF (long term financing) loans were linked to the policy rate, at a 500bps discount though (to 10pc), so as to continue incentivising exports while ensuring monetary tightening penetrates effectively.

`Together, these steps were taken to ensure a soft landing of the economy at a time when global dynamics remained challenging, while also cooling down economic activity, steering inflation towards expectations and providing support to the rupee in the backdrop of multi-year high imports and record imports,` he said.

In his survey about the expected policy rate on Monday, he found that 68pc of the totalrespondents are of the view that the SBP will keep the policy rate unchanged at 15pc.

However, 32pc of total respondents anticipate a hil(e; 16pc anticipate a rate hike ofless than 75 bps;8pc anticipate a rate hil(e of 100 bps; and 4pc anticipate a rate hike of 125 bps and above 150 bps.

Topline Research also conducted a poll of market participants to assess their views on the upcoming monetary policy announcement scheduled for Aug 22.

According to the survey, 56pc of participants expect no change in policy rate in the upcoming monetary policy. Around 43pc of the participants anticipate an increase, whereas 1pc of the participants expect a decrease in the policy rate.

Responding to Topline`s second question on their view about the policy rate by the end of FY23, 45pc of the participants expect the policy rate to be in the range of 12pc to14pc, and5pcofthe participants anticipate it to be in the range of 10-12pc by June 2023.