Addressing a press conference in Islamabad, the central bank chief said the Monetary Policy Committee (MPC) of the State Bank held a meeting earlier today. The MPC reviewed the current economic developments, he said. It highlighted that inflation had declined from a record-high of 38pc in May to 12.6 last month, he added.

The SBP chief said that the MPC decided to cut the policy rate by 100 basis points to 19.5 percent, effective from July 30, 2024.

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The committee observed that the June 2024 inflation was slightly better than anticipated, adding that it also assessed that the inflationary impact of the fiscal year 2025 budgetary measures was broadly in line with earlier expectations, a statement issued by the governor said.

The statement also said that the external account has continued to improve, as reflected in SBP’s foreign exchange reserves “despite substantial repayments of debt and other obligations”.

In the current circumstances, the MPC “viewed that there was a room to further reduce the policy rate in a calibrated manner to support economic activity, while keeping inflationary pressures in check”.

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The statement said that on positive developments, the current account deficit had narrowed in the fiscal year 2024 and SBP’s FX reserves had “improved significantly from $4.4 billion at end-June 2023 to above $9.0 billion”.

It also stated that the country had reached a staff level agreement with the International Monetary Fund (IMF) for a 3-year extended fund facility programme of $7bn.