Business

SBP slashes interest rate by 0.5pc

ISLAMABAD: The State Bank of Pakistan (SBP) on Saturday slashed the primary interest rate by half a percentage point on the back of receding inflation, improving economic indicators at home and sustainable cuts in commodities prices on international markets.

SBP cut the basic interest rates from 10 percent to 9.5 percent for the next two months.

“The State Bank of Pakistan has decided to reduce the policy rate by 50 bps (basis points) to 9.5 percent,” the bank announced in a statement.

Pakistan last week almost qualified for the release of a $1.1 billion instalment from a International Monetary Fund (IMF) facility despite political turmoil and recent floods.

After two weeks of talks with the Pakistani finance minister and officials in Dubai last week, the IMF had said it was encouraged by the strong fiscal performance achieved during the year 2013-14.

The IMF mission will submit its report to the IMF Executive Board in December to conclude two more reviews, after which $1.1 billion will be made available to Pakistan upon board approval.

The IMF granted an extended fund facility to cash-strapped Pakistan in September 2013 on the condition that it carry out extensive economic reforms especially in energy and taxation sectors.

“Limited impact of floods and a favourable trend in global commodity prices are the major highlights of the post-September monetary policy decision,” the central bank observed.

Untamed inflation — which in previous years remained in double digits — came down to 5.8 percent, a 17-month low, raising investors’ hopes that the central bank would review the interest rates downward.

“Indeed, CPI inflation (YoY) in October 2014 has come down sharply to 5.8 percent,” said the bank, explaining the reduction in the interest rate. -AFP

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