ISLAMABAD, Dec 26: The State Bank of Pakistan (SBP) is to issue its next monetary policy statement in January, which will remain valid till the end of the current financial year, says a senior government official.

Economic Advisor to the ministry of finance, Dr Ashfaque Hasan Khan, told Dawn here on Monday that the interest rate environment was likely to be further improved with the issuance of the next monetary policy statement. This statement, he said, will be issued after the newly-appointed Governor of the central bank Dr Shamshad Akhtar assumes her new responsibility and takes stock of the situation.

Earlier, the SBP had issued its monetary policy statement in July this year, which is valid until December 31, 2005. “Managing the country’s monetary policy is the responsibility of the central bank. Once she takes charge of the governorship, the monetary and fiscal coordination board will meet some time in January 2006, to take stock of the country’s monetary, fiscal and exchange rate policies,” he added. The board is headed by Prime Minister Shaukat Aziz, who is also the finance minister of the country. Responding to a question, he said that the new Pakistan Investment Bond (PIB), was expected to be issued shortly. The PIB is a paper through which the government borrows money to finance its fiscal deficit.

Dr Khan, who is also the director general of the Debt Coordination Committee, said that the government did not issue any PIB for well over one-and-a-half-year due to the fact that the budget deficit remained more or less on target despite the budgetary loss of over Rs60 billion accrued on account of freezing oil prices in the domestic market. These oil prices remained frozen from May 2004, to December 15, 2004.

Therefore, he pointed out, the government was not desperate and, secondly, the interest rate environment remained unsettled on account of the changing monetary policy stance of the central bank. In an unsettled interest rate environment, he pointed out, the government did not find it prudent to issue PIB and borrow at a very high cost to finance its budget deficit.

Inflation is now on a downward footing and the government is closely watching the interest rate situation and its stability. “Once the interest rate environment is settled, the government will issue the PIB,” he said.