State Bank of Pakistan announced a new cut in its interest rate by a whopping 200 basis point to 9 percent on Thursday.
The revision comes as a significant development as the global economic outlook has further deteriorated since the last cut by the central bank in March and the growth forecast for Pakistan has also been tremendously cut by global rating agencies.
Announcing the cut through an official statement, the central bank said, “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 released this week by the IMF.”
This is a much deeper recession than the 0.07 percent contraction during the global financial crisis in 2009, the bank added.
The statement also indicated that there were severe risks of a worse outcome.
The economy is expected to contract by 1.5 percent in FY20 before recovering to around 2 percent growth in FY21 while inflation is expected to be close to the lower end of the previously announced 11-12 percent this fiscal year, and to fall to 7-9 percent next fiscal year.
The statement said the Monetary Policy Committee has revised the rate on April 16 keeping in view these forecasts for Pakistan.
Interest rate slashed to 9 percent
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