KARACHI - The State Bank of Pakistan is expected to cut its policy rate further by 200 basis points or 2 per cent by the end of January this year. Banking sector analysts anticipate that IMF in its recent meeting will give a go-ahead to SBP for more rate cuts on the back of external slow down in domestic economy and contained external deficit. Therefore, the central bank may trim interest rate by 1 per cent each in next monetary policy reviews, which are scheduled to be announced in November (this month) and January 2010. Unlike the last review, analysts believe IMF will release the next tranche of $1.2 billion and provide a waiver on the fiscal deficit slippage. Encouragingly, this tranche will include $466 million budgetary support loan, which will help boost liquidity and development expenditure. It is important to note that IMF staff and Pakistani authorities are meeting in Dubai from November 2nd-12th, 2009 to assess the countrys quantitative and structural performances for the quarter ended September 2009. Research Analyst at JS Global Muzzammil Aslam is of the view that Pakistan has met most of its quantitative targets, with the exception of the fiscal deficit target. IMF had set budget deficit at around 1.3 per cent for the quarter, but dismal tax collections and higher security related expenditure will lead to a higher deficit for the period. On successful completion of the review, Pakistan is expected to receive around $1.2b, out of which $466m is earmarked for the budgetary support, analyst said. He said in term of security and law and order situation, the last quarter was the worst. However, macroeconomic data has depicted a continuous improvement in the period under review. Pakistans current account deficit shrank to $462m in 1QFY10 compared to $4.2b reported in the corresponding period last year. Inflation improved from 13.1 per cent in June to 10.1 per cent in September, while, underlying (core) inflation has come down to 11.9 per cent from 15.9 per cent in June 2009. This should provide room for SBP to further ease the monetary stance. On the flip side, the revenue collection for the period under review remained depressed and came in at Rs258b down 1.32pc YoY. He further said compared to the second review, staff authorities will be pleased by the Pakistani authorities as they have made a substantial progress towards meeting structural criteria. He informed Pakistans authorities have completed the reforms conditionalities, successfully, implemented by IMF earlier. The government has increased the electricity tariff by 6 per cent despite the serious law and order situation which persist in the county. Parliament is expected to approve the Banking Companies Ordinance. Moreover, inline with the IMF directions, SBP has initiated the phasing out of the interest rate subsidies from Export Financing Scheme, he said adding that significant progress has been made on the taxation side also. FBR has formed the Inland Revenue Department, where income, sales and excise taxation services will be consolidated.