Monetary policy.

THE State Bank's decision to hike its key policy rate to a 25-year high of 17pc to anchor inflation expectations is largely in line with the market forecast. It is, however, likely to continue its monetary tightening in March unless fiscal slippages are reversed and external sector risks mitigated by fresh foreign financial inflows. Though the bank has brushed aside the possibility of negative growth during FY23, GDP is now projected to expand below the revised forecast of 2pc due to industrial closures. Nonetheless, the notable takeaways from the monetary policy statement pertain to the central bank's firmer stance on the need for an early resumption of the IMF programme and fiscal consolidation. Not that the bank has ever ignored the importance of these two elements for stabilising the economy, but it now appears to have taken a more definitive position.

Noting that the dearth of fresh financial inflows and continuing debt repayments have led to a drawdown in reserves, it argues that the resumption of the IMF programme is critical for reducing market uncertainty and...