ISLAMABAD: The State Bank of Pakistan (SBP) on Thursday announced that it had slashed the interest rate by 200 basis points, bringing it down to 9% from 11%.
The decision was announced in a Monetary Policy Statement issued by the central bank in which it stated that the decision had been taken as the “global and domestic outlook has further deteriorated” due to the coronavirus pandemic.
“The MPC was of the view that this action 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. It would also help ensure that economic activity is better placed to recover when the pandemic subsides,” read the statement from the SBP.
The SBP noted that its measures would help provide support to the economy similar to the recent steps taken by the central bank, which included an employment scheme. According to the scheme, companies that do not lay off their workers will be able to avail loans at cheap interest rates.
The SBP’s measures to regulate economic activity include the provision of facilities of a one-year extension in principal payments, doubling of the period for rescheduling of loans from 90 to 180 days, and concessional financing for hospitals and medical centers incurring expenses to combat the coronavirus pandemic.
This is the second time that the interest rate has been reduced by the SBP in one month. The central bank has cut the interest rate by 4.25% in one month to cope with the coronavirus which has adversely impacted businesses globally and in Pakistan.
On April 10, SBP Governor Reza Baqir had indicated that the central bank will cut the interest rate in the days to come. Baqir had appeared on a private news channel where he said the SBP was monitoring the situation and will take action regarding the interest rate if it deemed so.
“The statistics that we have with us clearly show that inflation is expected to decrease further in the coming days,” he had said. “As we keep receiving information about the country’s economy, the State Bank will be ready to take action in future about the interest rate”.