Monetary policy.

The State Bank of Pakistan has increased the policy rate from 16% to 17% to tackle inflation and prevent foreign exchange reserves from depleting further. Central Banks worldwide employ monetary tools to manage inflation by controlling demand to prevent economic overheating. However, it is worth noting that the monetary tightening is happening at a time when the economy is already in a recession.

According to the World Bank and IMF forecasts, the country's GDP growth rate is projected to be no more than 1.5%. Indicators such as petroleum sales, auto demand, and consumer credit offtake suggest a slowdown in growth. Policymakers need to acknowledge that long-term structural reforms are necessary to address these issues.

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