The State Bank of Pakistan in an emergency meeting of the monetary policy committee (MPC) on Thursday slashed the country's policy rate by 200 points to nine per cent, the third time the central bank has reduced the interest rate in less than a month.

The decision was taken "in light of the reduction in growth and inflation" projections released by the International Monetary Fund (IMF) earlier this week, said a statement released by the SBP.

The statement added the committee "remains ready to take whatever further actions become necessary in response to the evolving economic impact of the coronavirus."

The committee noted the impact of the coronavirus pandemic on the global economy, which it said was "expected to enter into the sharpest downturn since the Great Depression".

"The MPC was of the view that this action [cutting policy rate] would cushion the impact of the coronavirus shock on growth and employment, including by easing borrowing costs and the debt service burden of households and firms, while also maintaining financial stability," the statement read.

"It would also help ensure that economic activity is better placed to recover when the pandemic subsides."

Earlier this week, the IMF in its annual World Economic Outlook, had projected Pakistan's economy to shrink by 1.5pc during this fiscal year, compared to 3.3pc growth in 2018-19.

The IMF had also forecast Pakistan’s consumer price index rising by 11.1pc this year before easing to 8pc next year. It also estimated the current account deficit at 1.7pc of GDP in 2019-20 which will increase to 2.4pc next fiscal year.

Moreover, the country’s unemployment rate is projected at 4.5pc in FY20 and 5.1pc the next fiscal year.

The SBP had reduced the policy rate on March 17 for the first time in four years, when it cut rates by 75 bps to 12.50pc citing a declining inflationary pressure and a need to sustain the economy that was hit by the coronavirus crisis.

The central bank had noted that the Covid-19 pandemic precipitated a slowdown in global demand and volatility in world financial markets, as well as a steep fall in oil prices.

“Since this disease has spread, it has started impacting our economy,” SBP Governor Reza Baqir had said at the time. The bank's earlier projection of 3.5pc growth for the ongoing fiscal year had slid to 3pc, he had added.

Exactly one week later, the central bank again slashed rates by 150 basis points to 11pc on March 24, saying "substantial new information on global and domestic developments" showed the pandemic had caused major disruptions to economic activity and the IMF had also significantly downgraded its global growth outlook for 2020 from 3.3 per cent growth previously to below zero.