Pakistan has further cut its key interest rate by 150 basis points to 11% amid the coronavirus outbreak and the impact it will have on the global economy.
The State Bank of Pakistan made this announcement in a press statement after its Monetary Policy Committee called an emergency meeting on Tuesday.
This is the second cut announced in a week by the central bank. The business community had been demanding a big cut in monetary policy rate to boost economic growth.
“Substantial new information on global and domestic developments has become available since the last MPC meeting. Globally, the coronavirus has severely increased in reach. This has caused major disruptions to economic activity and the IMF has also significantly downgraded its global growth outlook for 2020 from 3.3% growth previously to below zero,” read SBP’s statement.
It said these global developments have led to a sharp fall in international trade. “On the domestic front, since the last MPC, the number of COVID-19 cases has increased considerably, prompting social distancing and curtailment of activity. This is expected to lead to noticeable slowdown in domestic demand,” it said explaining the reasons for the second cut.
The MPC believes that this rate cut will “cushion the growth slowdown while protecting inflation expectations”.
On March 17, the central bank had slashed the policy rate by 75 basis points to 12.50%.
The official statement had attributed the cut to the central bank’s efforts in aiding healthcare and trade amid the coronavirus pandemic. It noted that the viral outbreak has caused a slowdown in the global economy and also precipitated an oil crisis.