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November 26, 2020
Business Latest Pakistan

SBP raises key interest rate by 25bps to 10.25pc

LAHORE: The State Bank of Pakistan (SBP) on Thursday raised the key interest rate by 25 basis points to 10.25 percent for the period of Feb-March.

The central bank issued its Monetary Policy Statement for the next three months. The bank as part of monetary tightening had already raised the key interest rate by 425 basis points during 2018.

Announcing the MPS at a press conference, Governor SBP Tariq Bajwa stated that the Monetary Policy Committee (MPC) had observed the effect of the governments’ stabilization measures were gradually unravelling.

Bajwa said that the bank noted improvement in consumer confidence and the economic uncertainty had decreased. However, he added, the fiscal deficit is yet to exhibit indications of consolidation notwithstanding the decrease in Public Sector Development Programme (PSDP) spending.

The SBP governor said that though the stabilization measures are gradually working, underlying inflationary pressures persist.

A nominal rise in exports and healthy growth in remittances have contained the current account deficit, but it still remains high, he noted.

According to the SBP governor, the financing of the current account deficit remained daunting as foreign direct investment, official inflows and private loans were inadequate to totally fund the deficit.

Hence, a major chunk of the current account deficit was managed by exhausting the country’s own foreign exchange resources, which caused SBP net liquid foreign exchange reserves to decline to $7.2 billion by end of December last year, said the central bank chief.