State Bank of Pakistan slashes policy rate to 9 percent

This undated file photo shows premises of the State Bank of Pakistan. (Shutterstock)
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Updated 17 April 2020

State Bank of Pakistan slashes policy rate to 9 percent

  • Central bank projects negative 1.5 percent economic growth for the current fiscal year
  • Industrialists argue the rate is still too high for current circumstances

KARACHI: Pakistan’s central bank slashed the key policy rate by 200 basis points to 9 percent in an unprecedented move on Thursday, taking the total rate cut in less than a month to 4.25 percent.
State Bank of Pakistan also reduced its economic growth projection for the current fiscal year from 3 percent to 1.5 percent, amid "exceptionally high uncertainty about the severity and duration of the coronavirus shock," it said in a statement on Thursday.
The prediction is in line with forecasts by the International Monetary Fund (IMF), which gave the same negative growth rate for Pakistan.
“In light of this reduction in growth and inflation expectations, the Monetary Policy Committee (MPC) decided at its emergency meeting today, to cut the policy rate by a further 200 basis points to 9 percent," the SBP statement read.
The SBP expects inflation to be in the 11-12 percent range this year.
The central bank noted that the global and domestic economic outlook has worsened since the MPC's last meeting on March 24. The world economy is expected to enter into the sharpest downturn since the Great Depression, contracting by as much as 3 percent in 2020, according to projections by the IMF.
"Pakistan’s economy is closely linked with global economy. Exports, imports, foreign direct investment, investment in treasury bill, remittances, foreign assistance, development partnership, provision of services etc are just some examples how we are linked with global economy and can’t remain insulated from global recession," Dr. Abdul Qayum Suleri, member of the government’s Economic Advisory Council EAC, told Arab News.
On Wednesday, G-20 countries decided to suspend principal repayments and interest payments for all the International Development Association (IDA) countries, including Pakistan, that are currently on debt service to IMF and World Bank, and all least developed countries as defined by the United Nations that are currently on any debt service to the IMF and the World Bank.
"G-20 debt rollover and IMF special loan helped Pakistan's central bank to further reduce interest rate to provide support to the economy that is likely to contract this year due to lockdown," said Muhammad Sohail, CEO of Topline Securities.
According to Pakistani industrialists, however, the rate is still very high and the cut was insufficient in the current circumstances when all business activity is on lockdown.
"I think in the prevailing situation the rate cut is not enough and the 9 percent interest rate is still very high that would be even higher when bank charges will be added to it," Mian Anjum Nisar, president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) told Arab News, adding that the rate should be 5 percent, if not lower.


Black boxes from crashed Pakistan jet head to France for analysis

Updated 6 min 26 sec ago

Black boxes from crashed Pakistan jet head to France for analysis

  • French agency is involved in the Pakistan-led probe because the crashed A320 was designed by France-based Airbus
  • A320 operated by PIA crashed short of the runway on May 22, killing 97 people on board

PARIS/KARACHI: Air crash investigators were en route from Pakistan to France on Monday with two ‘black box’ flight recorders of a Pakistani airliner that crashed in a residential area while trying to land in the port city of Karachi last month, airport officials said.
An Airbus test plane, unusually commissioned to transport the boxes because of disruption from the coronavirus crisis, was due to arrive on Monday afternoon at Le Bourget near Paris where France’s BEA air accident agency was standing by to open them.
The French agency is involved in the Pakistan-led probe because the crashed A320 was designed by France-based Airbus, and is additionally carrying out the crucial task of decoding the recorders because it has state-of-the-art equipment.
The A320 operated by Pakistan International Airlines crashed short of the runway on May 22, killing 97 people on board after the pilots reported the loss of both engines.
Two passengers survived and there were no reports of casualties on the ground. The crash site remained sealed off on Monday.
BEA experts are expected to open and download information from the boxes — one containing cockpit voice recordings and the other aircraft data — on Tuesday, subject to the recording chips being intact inside their crash-resistant shells.
Initial reports suggested the jetliner scraped its engines along the runway on a first attempt to land following what appeared to be an unstable approach, arriving steep and fast.
Investigators will analyze the cockpit data to try to understand whether damage to the engines from the first landing attempt caused them to cut out before the second attempt, leaving the airplane unable to make it to the airport perimeter.
Experts warn it is too early to say what caused the crash.
In Karachi, as officials continued to try to identify victims’ bodies using DNA samples, families took to social media to voice their grief at not being able to perform the last rites of their loved ones.
The airline said on Sunday problems in identifying victims were caused by delays in DNA identification outside its control.