KARACH: State Bank of Pakistan (SBP) has reduced the interest rates on Saturday by 1 percent setting the new rate to 8.5 % for the next two months.
Announcing the first monetary policy of the current year, Governor SBP Ashraf Mehmood Withra said that fiscal deficit remained under control while remittances increased which positively affected the foreign exchange reserves. He said that better supply helped keeping the inflation and prices of daily use commodities down.
Governor State Bank told that inflation rate remained at 4.3% during the month of December and will fall further down. “Inflation rate at the end of the fiscal year is expected to be 5.5%”, he said. He said that inflation rate was estimated by SBP to remain at 8.5% but reduction in global oil prices helped the national economy. He said that the reduction in oil prices helped improve exports.
Withra said that reduction in the prices of commodities may cause increase in demand.
He told that the installments by International Monetary Fund (IMF) and Sukook bonds helped improve the foreign exchange reserves.
Governor SBP feared that failure in achieving the estimated amount from privatization will adversely affect the accounts.
He stressed that reforms should be top priority to attract foreign investment. He said that fiscal deficit remained under control despite increase in interest-based payments. He said that the SBP loans to government remained lower than the targets while increase in defense expenditure will increase the national expenditure. He said that these things may cause problems in achieving the targets set by IMF.
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