ISLAMABAD, May 16 (NNN-APP) – The State Bank of Pakistan (SBP) announced to cut the country’s policy rate by 100 basis points to eight percent, to support businesses against the COVID-19 impacts.
According to the statement, the Monetary Policy Committee of the central bank slashed the rate, hoping that “the inflation outlook improved further, in light of the recent cut in domestic fuel prices” which can also lead inflation to fall closer to the lower end of the previously announced ranges of 11-12 percent this fiscal year, and 7-9 percent next fiscal year.
The central bank highlighted that the pandemic has created unique challenges for a monetary policy, due to its non-economic origin and the temporary disruption of economic activity required to combat it.
The SBP viewed that the fresh-cut in the rate can provide liquidity support to households and businesses, to help them through the ensuing temporary phase of economic disruption.
“The successive policy rate cuts and sizeable cheap loans, enhanced refinancing facilities, helped maintain credit flows, bolster the cash flow of borrowers, and support asset prices,” added the statement.
Following the lock-down, the SBP revised monetary policy by four times, slashing the policy rate by 525 basis points bringing it down to eight percent which was 13.25 percent before Mar 17.
The bank believed that the country’s proactive fiscal stimulus, including targeted support packages for low-income households, small- and medium-sized enterprises, and the construction sector, as well as, assistance from the international community, would provide ample cushion to growth and employment, while also maintaining financial stability.
The central bank said, easing the lock-down would provide stimulus to economic activities, fearing that a possible sharp rise in infections could prompt fresh lock-downs, and the recovery could prove more sluggish than currently anticipated.– NNN-APP
