SBP cuts policy rate by 100 bps to bring interest rate to 7%

The State Bank of Pakistan (SBP) has announced that it had slashed the policy rate by 100 basis points to bring the interest rate to 7 per cent. “This decision reflected the Monetary Policy Committee’s (MPC’s) view that the inflation outlook has improved further, while the domestic economic slowdown continues and downside risks to growth have increased,” the statement from the State Bank of Pakistan said.

The rate cut is the fifth since the coronavirus pandemic hit the global economy, with the total reduction being 625 basis points.

Pakistan’s central bank cut its main interest rate by 100 basis points to 7 per cent, the bank said in a statement on Thursday.

“This decision reflected the MPC’s view that the inflation outlook has improved further, while the domestic economic slowdown continues and downside risks to growth have increased. Against this backdrop of receding demand-side inflation risks, the priority of monetary policy has appropriately shifted toward supporting growth and employment during these challenging times,” the central bank said in its statement.

“The MPC noted that with approximately Rs3.3 trillion worth of loans due to be repriced by early July 2020, this was an opportune moment to take action from a monetary policy transmission perspective,” it added.

The MPC observed that there was a fear of a second wave of the COVID-19 pandemic hitting the country. “The MPC observed that risks to the global outlook are heavily skewed to the downside and the path of recovery remains uncertain.

The MPC also noted that in its update of the World Economic Outlook (WEO) released yesterday, the IMF downgraded its 2020 global growth forecast further to -4.9 per cent, 1.9 percentage points lower than in April, and projected a more gradual recovery than previously anticipated,” SBP stated.

The state bank added that looking ahead, the economy was expected to “recover gradually” in FY21, supported by easing lockdowns, supportive macroeconomic policies and a pick-up in global growth.

“Risks are skewed to the downside and the recovery will depend critically on the evolution of the pandemic both in Pakistan and abroad,” it added.

Earlier the State Bank of Pakistan (SBP) has raised Rs112 billion through the sale of Pakistan Investment Bonds (PIBs), according to a statement issued on Wednesday.

SBP data showed that the cut-off yields for all three-year, five-year and 10-year PIBs increased. However, the cut-off yield for 15-year PIB decreased.

The yields on three-year bonds rose by 33 basis points, from 7.64 per cent to 7.97 per cent; the yields on five-year bonds also increased by 39 basis points from 8.05 per cent to 8.44 per cent; while the yields on 10-year bonds rose by 30 basis points from 8.69 per cent to 8.99 per cent.

The yield for 15-year bonds fell by seven basis points, from 9.97 per cent to 9.9 per cent. As per the auction result, the initial target was Rs140 billion.

Meanwhile the business community Thursday demanded immediate payment of pending income tax refund to save them financial crunch and bankruptcy.

Talking to media on Thursday Mian Faiz Bukhsh,most senior member of tax bar said It is very unfortunate that most of the times FBR and federal Government do not fulfil their promises made with the business community and this practice is continued in crucial times even in the wake of Coronavirus.

He further stated that under the instructions of honPrime Minister FBR asked the covid stricken tax payers to apply for due refunds. The RTOs were instructed to forward the amount of refunds to the extent which were verifiable through the system and some cases were sent to FBR while others are lying with the RTOs and still are on hold till further instructions from FBR.

The business community mostly manufacturers are under agony and facing extreme difficulties because the callous behavour of FBR inspite of the clear cut instructions by the Prime Minister

Mian Faiz Bukhsh hoped that lawful due refund amount of the tax payers will be released soon for the sake of justice and to save the taxpayers from bankruptcy, It is pertinent to mention that these amounts are refundable from the FBR and if these payments are made to the taxpayers it is not an extra favour rather the FBR will be doing which should have been done long ago.

Agencies