ISLAMABAD: The State Bank of Pakistan has announced a 2% reduction in the interest rate, lowering it by 200 basis points (bps) as part of its new monetary policy.
According to the announcement issued by the central bank, the interest rate has been reduced from 19.5% to 17.5%.
The State Bank of Pakistan has said in its statement that the rate of inflation in the country is continuously decreasing. However, inflation is likely to rise due to budget announcements and changes in electricity and gas prices.
As per the central bank, fiscal indicators continued to improve during July-March FY24, with inflation in single digits.
The statement also noted that the country’s trade will improve proportionately. In addition, the current account deficit has also decreased.
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According to the State Bank, there was a favorable change in global oil and food prices, with oil prices decreasing sharply. The foreign exchange reserves of the State Bank are about 9.5 billion dollars, and the tax collection by the FBR during July to August was significantly lower than the target.
According to the statement, sales of cement and petroleum products increased by 8.5% and 6.8% respectively in August, while remittances increased in July 2024, and the current account deficit was limited to 0.2 billion dollars.
In this regard, V News sought the opinions of economic experts on the potential benefits of the interest rate reduction and whether it will help lower inflation.
Economic analyst Khurram Shahzad said that it is a positive move by the State Bank to reduce the interest rate by 200 basis points. This decision is expected to further reduce inflation, and it is also anticipated that our current account will remain in surplus. This was made possible due to the decrease in inflation across the country.
Khurram Shahzad added that the reduction in the interest rate will boost economic activities in the country, as people will withdraw money from banks and invest it in various projects.
When asked by the reporter if the interest rate reduction will lower vehicle prices, former Chairman of the Pakistan Auto Manufacturers Association Mashhood Ali Khan said that it does not seem immediately possible. He noted that significant improvement is unlikely until interest rates fall to 10% or lower.
He further stated that the industry will not be able to move forward until vehicles are purchased, and this will only be possible when the common man’s financial situation allows it.
