The loan deal that was confirmed this week between the IMF and Pakistan envisages a further sharp tightening of fiscal policy. This drag from fiscal policy is the main reason why we think GDP growth will remain subdued, despite the boost from falling inflation and lower interest rates.
Meanwhile, Sri Lanka’s central bank left interest rates on hold at its scheduled meeting today. The uncertain political situation following last weekend's presidential election is the main risk to our view that the CBSL will cut rates before the end of the year.
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