Central bank says decision to reduce interest rate has been taken due to uncertainty over impact of coronavirus pandemic
The State Bank of Pakistan on Tuesday announced a 1.5 percent cut in the interest rate, reducing it to 11 percent, claiming the decision was taken due to the “uncertainty” over the impact of the ongoing coronavirus pandemic.
In a press release, the central bank said the measure—taken nearly a week after it cut the policy rate to 12.5 percent—was aimed “to facilitate businesses and exporters who seek loans frequently from commercial banks to run their businesses.” It said that the coronavirus outbreak had hit several industries and this was designed to help them.
“The global economy has been hit hard by the coronavirus, with the pandemic causing several businesses, including restaurants, hotels, airlines and manufacturing businesses to record losses in billions,” it said, adding that the Monetary Policy Committee had taken into account the “considerable uncertainty about how the coronavirus outbreak would impact the global economy and Pakistan.”
According to the SBP, “substantial new information on global and domestic developments has become available” since the committee meeting of last week. “The developments discussed during the meeting imply that the outlook for growth and inflation in Pakistan is likely to be revised down further,” it posted on Twitter.
Also on Tuesday, the State Bank of Pakistan announced it had introduced various measures to protect the public given the looming potential economic impact of the COVID-19 pandemic. According to the central bank’s website, these include the availability and continuity of financial services; promoting digital payments; relaxing credit requirements for exporters and importers; provision of fresh, disinfected cash for citizens; and facilitating new investment through subsidized credit.
Earlier, the central bank had announced that from March 24, banks would remain open Monday-Friday from at 10 a.m. to 4:30 p.m. It had also directed all banks to immediately shutter any branches where a case of coronavirus is reported among staff and to not reopen until the facility has been properly disinfected.