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KARACHI: State Bank of Pakistan (SBP) on Saturday slashed the benchmark interest rates by 50 basis points to 6 per cent from 6.5 pc as lower fuel prices eased inflationary pressures.
Inflation decelerated to 1.7 pc in August from a year earlier, the bank said, and it predicts that inflation for the financial year ending in 2016 will remain below the target of 6 pc.
Lower borrowing costs and lower oil prices are helping Prime Minister Nawaz Sharif's government, who is under pressure to do more to revive the economy, end persistent power shortages and attract badly needed foreign investment.
Standard and Poor's earlier in May had revised Pakistan's credit rating outlook from stable to positive and forecast higher GDP growth for 2015 to 2017, amid a stint of economic reforms.
In March, Moody's upgraded Pakistan's dollar bonds rating by one notch from stable to positive.
Net foreign exchange reserves with the central bank reached $18.598 billion dollars this month from just $3.2 billion in January 2014.
The International Monetary Fund (IMF) had also voiced satisfaction with Pakistan's progress on reforms, which were required under a $6.6-billion bailout agreed in 2013.
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Comments (19) Closed
Sep 12, 2015 04:42pm
Excellent news.
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Sep 12, 2015 04:52pm
But banks are still reluctant to give money small businessman. Govt is still major client for borrowing money from Banks
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Sep 12, 2015 05:04pm
Inflation at its 20 years lowest. Very good
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Sep 12, 2015 06:17pm
@Larka L Inflation at its 20 years lowest and ordinary bread at Rs.20/- at its highest ever price and lowest ever weight! No sasti-rooti in scam even!
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Sep 12, 2015 06:21pm
Falling interest rates with depositors sitting on the sidelines to withdraw cash from the banks due to withholding tax issue, the cut of 50 bps on interest rate is the last straw on the camel's back. Exports are down and massive government debts will soon become un-manageable. This is what had happened in Jan-1992 in Turkey. A sudden lack of confidence of depositors, disappearance of money from the system, govt. Debt to GDP crossing 70% pushed the interest rates from 2% to 200% in less than one year. Are we getting closer to that disaster?
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Sep 12, 2015 07:24pm
This is the bad move on the part of SBP as it is triggered on the behest of PMLN Govt and under IMF pressure. The negative impact if it yield s on the return of National Savings Schemes then I send big curse on SBP and the Govt. SBP should protect the interest of investors of NS Schemes, pensioners and widows and senior citizens. Otherwise, curse will fall on SBP and Govt and we will pray for higher and higher oil prices.........
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Sep 12, 2015 07:38pm
@M. Anwar Qureshi, at a personal level i would agree to receiving easy money monthly without doing anything, especially in view of lack of social security. However, we as a nation needs to put our money to practical use insome business as it will end the unemployment. We own lots of money but hardly create any employment for anyone due to lack of risk taking tendency.
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Sep 12, 2015 07:43pm
SBP... I have fallen in love with you. Please also finish off RS.5,000 note. It was made for corruption against your will.
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Sep 12, 2015 07:54pm
@M.Saeed yes but inflation is the rate of increase in prices. If inflation was rampant, bread would be 25 tomorrow. Look man, policies should never be taken lightly. Thanks to the previous government, their botched policies and corruption, the fruits of which we will enjoy for years to come. That is where today's prices come from. Also understand that pricing is an extremely delicate matter. Pakistan's farmer today is being crushed because of high input cost and low selling price of produce (this is because globally commodity prices have been falling). Its complicated. Pricing and monetary policy have to take a lot of variables into account. It is not as easy as it looks.
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Sep 12, 2015 07:56pm
@M. Anwar Qureshi if monetary policy is made on the consideration of National Savings Scheme, then God help this country.
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Sep 12, 2015 07:58pm
@Adi Well said.
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Sep 12, 2015 09:57pm
Discount rate was 7% before not 6.50%...
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Sep 13, 2015 12:12am
SBP must cancel Prize bond scheme and Rs 5000,1000,500 notes.We will find the prices coming down of daily use as well of properties.Presently the entire black money is in properties and share market.If no action is taken now then US$ may rise unexpectedly as the black money will go out of this country.
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Sep 13, 2015 12:37am
@Karachite : National till recently was one and only organization of the Government that was free from corruption and constantly running with regular progress. Old citizen mostly pensioners used to invest their gratuities and other savings for earning their livings at respectable "profits" which was decreed by over 40 topmost religious scholars as being not "Interest" and Halal.
But, Mr. Dar is regularly slaughtering the profits in National Savings, almost every 3 months, making the downfall of the only clean and productive scheme of the Government.
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Sep 13, 2015 01:05am
How is it that inflation rate is going down but prices of dairy products going up. Milk almost touching Rs 100/- per liter and similarly other essential items . For a common man like me State Bank should quote and compare prices of essential items like, Ata, rice, pulses,cooking oil,milk, meat, sugar, salt, masalas, cooking gas, transport fares cloth and housing rents.
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Sep 13, 2015 11:55am
inflation outlook in not very positive. exchange rate is rising (dollar appreciating fast) whereas sbp is making cuts to its policy rate to please the govt for providing them with cheap loans. on the other hand, private businesses are still being denied access to lending by banks due to high risk of default since the banks know better that the environment is still not conducive enough for business.
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Sep 13, 2015 12:30pm
this policy of cutting interest rate is gonna benifit the small to large buisnesses to invest but from depositors side they gonna with draw their cash from banks .....and from the other side gov is wiling to print more money due to its presistently increasing debts and deficits positions....
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Sep 13, 2015 01:59pm
@Adil you are welcome to join stock market where shares like FFC,Engro give return of over 10% per annum in dividends plus 20% increase in share price on yearly basis. Its not so hard to file return, if you are jobless file it empty. I work in KSE as a trader and when i asked FBR what to write, they said you file under "unemployed" as government is keeping stock market under tax net and stock traders pay their due share on yearly unless they make over 4 lakh in dividends then they have to file proper return along with dividend income papers.
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Sep 14, 2015 12:09pm
There are lots of apprehensions regarding projected revival of economy and GDP growth through lowering of interest rate. Lower interest rate environment is more likely to divert investment in real estate and excessive government borrowing. Core private businesses and manufacturing sector might not be the main beneficiaries in terms of expansion of their volumes since that depends on multiple industry specific factors and demand/supply dynamics rather than cheaper availability of credit. Nevertheless business houses with huge debt will benefit from lower interest expense.
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