KARACHI: The State Bank of Pakistan (SBP) on Thursday announced a revised monetary policy and decided to reduce the key interest rate by 200 basis points to nine percent.
The central bank’s Monetary Policy Committee announced in a statement that the kyey interest rate was reduced by two percent that now stands at 9 percent from 11 percent. The interest rate has been reduced keeping in view the coronavirus situation in the country.
It may be noted that the interest rate declined by 4.25 percent in one month. The central had reduced the policy rate from 13.25 percent to 12.50 percent, and later to eleven percent due to the worsening economic situation in the country,
A statement issued by SBP noted that the global and domestic outlook has further deteriorated since the last Monetary Policy Committee meeting, prompting the further reduction in key interest rate.
“The world economy is expected to enter into the sharpest downturn since the Great Depression, contracting by as much as 3 percent in 2020, according to projections released this week by the IMF,” the statement read.
“While there is exceptionally high uncertainty about the severity and duration of the coronavirus shock, the developments discussed above imply further downward revision in the outlook for growth and inflation,” the central bank said.
In January, the SBP left the interest rate unchanged at 13.25 percent. The SBP announces a target rate every two months, which serves as the benchmark interest rate for overnight funds in the interbank market.
Read more: IMF will approve $1.4bn loan for Pakistan today: Advisor Finance
In the annual World Economic Outlook report released on Tuesday, the global financial institution said Pakistan’s economy may contract sharply by negative 1.5 percent this fiscal year, a downgrade of nearly 4 percent from its January 2020 report.
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