Interest rate unchanged at 12 percent for February and March

Interest rate unchanged at 12 percent for February and March

Saturday, February 11, 2012: State Bank of Pakistan (SBP) has decided to maintain the interest rate for the month of February and March. The interest rate will remain at 12 percent during the aforementioned months. The decision
of not bringing any change in the interest rate was taken in wake of the double digit inflation rate prevailing in the country.

Yaseen Anwar, SBP Governor, during a press conference at the Bank’s head office in Karachi said, “The central board of directors of the State Bank has decided to keep interest rate unchanged.”

The basic problem the central bank is facing is to finance the countries fiscal and current account deficits. Anwar while revealing the monetary policy for the month of February and March said, “Inflation rate is still in double
digits, the central bank could further cut the interest rate, if the inflation was in single digit.”

In the fiscal year, July 2011-June 2012, the SBP has already reduced the interest rate twice. The governor of SBP seems to accord with the central banks policy of reducing the discount rate. The governor reckons that these moves
helped control a continuous rise in non-performing loans and increased credit flow to the private sector.

The SBP official said that maintaining the interest rate at 12 percent was done because the foreign exchange reserves are declining, while the government had done substantial borrowings from the banking system, thus the availability
of credit for the private sector had squeezed.

SBP wants to remove uncertainties from the system. An official said, “For this to happen, the business confidence needs to be revived by reducing uncertainties due to energy shortages. Against this backdrop, the SBP considers the
200-basis-point reduction in the policy rate already in FY12, to be appropriate, and has decided to keep the rate unchanged at 12 per cent”

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Posted by Wajahat Javed on Feb 12 2012. Filed under Business, Pakistan. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry