SBP decreases policy rate by 75bps to tackle coronavirus outbreak

KARACHI (92 News) – The State Bank of Pakistan (SBP) on Tuesday announced to cut its policy rate by 75 basis points to 12.50 from 13.25 to tackle the economic challenges posed by the global coronavirus outbreak. The SBP’s Monetary Policy Committee (MPC) which met today took stock of the dominant development of the coronavirus pandemic since its last meeting. The SBP’s Monetary Policy Committee (MPC) which met today took stock of the dominant development of the coronavirus pandemic since its last meeting. According to a statement issued by the SBP, the virus spread has “precipitated a slowdown in world demand and volatility in global financial markets, as well as a steep fall in global oil prices. Together with the domestic deceleration in food prices and significant decline in consumer price expectations, the outlook for inflation in Pakistan has therefore improved, paving the way for today’s rate cut. “As a result, volatility is likely to subside as global risk aversion reduces. The SBP stands ready to take whatever additional actions that may be necessary to safeguard price and financial stability and support economic growth.” Secondly, the SBP announced a “Temporary Economic Refinance Facility (TERF) and its Shariah compliant version” to stimulate new investment in manufacturing. Under this scheme, it added, the SBP will refinance banks to provide financing at a maximum end-user rate of 7 per cent for 10 years for setting up of new industrial units. The total size of the scheme is Rs 100 billion, with a maximum loan size per project of Rs 5 billion.