Although the central bank of India, the Reserve Bank of India, has frozen the interest rates since February 2023, Pakistan has provided a huge relief to more than 25 crore people of its country. Yes, the Central Bank of Pakistan has made a huge cut in the official interest rate. According to media reports, to give relief to the common people, the interest rates were reduced by 2 percent. After which it will be very easy for the people of Pakistan to take loans. Let us also tell you what the interest rates have become in Pakistan.
Pakistan cut rates by 2 percent
The Central Bank of Pakistan on Thursday cut the policy interest rate by two percent and brought it to 17.5 percent. The State Bank of Pakistan said in a statement that its Monetary Policy Committee (MPC) has decided to cut the policy interest rate by two percentage points. Thus, the policy interest rate has come down from 19.5 percent to 17.5 percent. The central bank said that before taking this decision, the MPC took into account many factors affecting the inflation outlook. Retail inflation in Pakistan, which is facing a financial crisis, was 9.6 percent in the month of August.
A 5 percent cut was suggested.
Financial experts had expected a 1.5 percent interest rate cut. However, some experts had also expressed the possibility of a two percentage point reduction. However, industry leaders had advocated a deeper cut of 500 basis points to boost economic growth. The statement said the Monetary Policy Committee (MPC) assessed that real interest rates are still sufficiently positive to help bring down inflation to the medium-term target of 5 to 7 percent and ensure macroeconomic stability. The MPC said global oil prices have fallen sharply and despite weak flows and continued loan repayments, the SBP’s foreign reserves stood at $9.5 billion as of Sept. 6.
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What is the estimated growth?
Throughout the FY24 fiscal year, the SBP kept the interest rate at a high level of 22 per cent. In the past few months, it made two consecutive cuts – initially by 150 bps, followed by 100 bps – taking the total reduction to 2.5 percentage points. The government has stressed that it is taking steps to ensure that this is the last time Pakistan will approach the IMF, provided all the IMF conditions are met on time. The estimated growth rate for the current financial year is 3.5 per cent, which was up from 2.4 per cent in FY24. Experts believe that reducing the cost of borrowing will encourage private sector investment, boost economic activity and create much-needed jobs.
