Pakistan cuts key interest rate to 8%
The MPC noted the swift and forceful monetary easing of 525 basis point in the two months since the beginning of the crisis. - Reuters
Dubai - This is the fourth time it has cut rates since the coronavirus pandemic hit two months ago.
Pakistan's central bank on Friday reduced the policy rate by 100 basis points to eight per cent to ease pressure on local economy struggling to overcome economic slowdown due to coronavirus outbreak.
"The Monetary Policy Committee (MPC) has decided to reduce the policy rate from nine per cent to eight per cent. This decision reflected the MPC's view that the inflation outlook has improved further in light of the recent cut in domestic fuel prices. As a result, inflation could fall closer to the lower end of the previously announced ranges of 11-12 per cent this fiscal year and 7-9 per cent next fiscal year," State Bank of Pakistan, the central bank, said in a statement.
The MPC noted the swift and forceful monetary easing of 525 basis point in the two months since the beginning of the crisis and SBP's measures to extend principal repayments, provide payroll financing, and other measures to support liquidity.
This is the fourth time it has cut rates since the coronavirus pandemic hit two months ago. Before the crisis hit, the bank had held rates at an elevated level of 13.25 per cent for months as it sought to reign in inflation which rose to more than 14% in January. Falling oil prices now make inflation less of a concern.
Meanwhile, the Ministry of Finance has said that the rating review conducted by Moody's Investor Service on May 14 doest not downgrade Pakistan's B3 rating.
In a statement, the ministry said the Moody's has only placed the current rating under review for downgrade in case the G20 Covid-19 Debt Service Suspension Initiative extends to private sector creditors.
"The action is, therefore, not Pakistan specific and is in line with the rating agency's global approach to place under review for downgrade all sovereigns availing the G20 facility," the ministry said.