March 25, 2017 / 10:17 AM / in 7 months

UPDATE 1-Pakistan central bank keeps main policy rate steady at 5.75 pct

(Adds detail from statement, background)

KARACHI, Pakistan, March 25 (Reuters) - Pakistan’s central bank maintained its main policy interest rate at 5.75 percent on Saturday, the bank said in a statement, citing stable inflation expectations and the gathering pace of economic activity.

The move highlights the generally positive direction in the economy in Pakistan since the country emerged from an economic crisis just over three years ago with a reform programme backed by the International Monetary Fund (IMF).

“The real economic activity continues to gather pace at the back of better agricultural output, increase in key large-scale manufacturing sectors, and a healthy uptick in credit to the private sector,” the central bank said in a statement.

Domestic demand was showing signs of improvement with recent consumer sentiment surveys pointing to further increases in consumer demand this year, the statement said.

Low and stable market rates led to a pick up in borrowing by the private sector for both investment and consumer financing.

The stronger economic picture spurred investments but exports, a persistent weak spot, did not have any sustained improvement. Together with a small decline in remittances, this pushed the current account deficit to $5.5 billion in the July-February period, the bank said.

But the central bank said that it expected the current account deficit to be contained by recent steps to boost exports and limit non-essential imports.

Government reforms of the power sector, together with tax and revenue measures designed to close loopholes and broaden the tax base have strengthened the economy.

However, the IMF says the government must focus on further increasing tax revenues and boosting economic growth and private sector investment. (Reporting by Rasa Hassan; Writing by James Mackenzie; Editing by Christian Schmollinger)

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