KARACHI/ISLAMABAD: The State Bank of Pakistan on Wednesday announced yet another cut in the interest rate, this time slashing it by 1.5% to 11%, saying there was “considerable uncertainty” over the impact of the coronavirus pandemic.
In a press release, it said the move — almost a week after the policy rate was cut by 75 basis points to 12.5% — was aimed “to facilitate businesses and exporters who seek loans frequently from commercial banks to run their businesses”.
“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 added.
The central bank mentioned that the Monetary Policy Committee (MPC) took into account the “considerable uncertainty about how the Coronavirus outbreak would impact the global economy and Pakistan”.
“Substantial new information on global and domestic developments has become available since the last MPC meeting,” it said on Twitter. “The developments discussed during the meeting imply that the outlook for growth and inflation in Pakistan is likely to be revised down further.”
Earlier, the SBP had said it introduced various policy measures to protect the public given the looming potential economic impact amid the COVID19 outbreak.
It said it had created a dedicated page for the new measures.
A day prior, the SBP had informed public that banks across Pakistan would remain open but with critical staff and limited timings to ensure operations continued.
It said in a circular: “All branches/ work places will remain open, throughout Pakistan with bare minimum staff for ensuring the continuity of essential banking services.
“Under this arrangement, from March 24, 2020, branches/ work places will open (from Monday to Friday) at 10:00 am and close at 4:30 pm till further instructions by SBP,” it had added, noting that should a COVID-19 case emerge at any branch, it should be closed temporarily after intimation to the relevant authorities.
Measures amid virus panic
Last week, the central bank had also introduced two key measures, apart from the interest rate cut, to facilitate the coronavirus-hit Pakistani economy and encourage investment at the same time.
It said they were aimed at tackling “the economic and health challenges posed by the spread of COVID-19”, or the novel coronavirus.
The new measures include a “Temporary Economic Refinance Facility (TERF)” and a “Refinance Facility for Combating COVID–19 (RFCC)” — both accompanied with their Shariah-compliant versions.
The TERF targeted stimulating new investment in manufacturing, whereas the RFCC aims at providing support to hospitals and medical facilities in fighting the coronavirus pandemic.
‘Depressing’ and ‘conservative’
Its March 17 move to cut the policy rate to 12.5% had disappointed traders and the business community, who were expecting a bigger reduction of at least 200-300 basis points.
The SBP had also announced at the time that loans to import medical equipment would be provided at 3% as it was crucial to control coronavirus pandemic as soon as possible. It added that it would offer lending at zero interest rate to financial institutions providing loans for similar purposes.
Business tycoons and noted stock traders had slammed the decision, terming it “depressing” and “conservative” and that the fraternity “has lost its trust in the leadership”.