SBP maintains interest rate at 5.75 percent
SBP Governor Ashraf Wathra announced monetary policy.
ISLAMABAD (Dunya News) - State Bank of Pakistan (SBP) Governor Ashraf Mahmood Wathra on Saturday announced that interest rate would be maintained at 5.75 percent for the next two months.
Wathra, while presenting bimonthly monetary policy, said that average inflation clocked in at 3.9 percent during the first half of the year, lower than the earlier projections due to smooth supply of perishable items, stable exchange rate, and government’s absorption of the impact of higher international oil prices.
He further narrated that current trends suggest that the actual inflation would be lower than the target rate of 6 percent in FY17.
The central bank termed growing CPEC-related imports, decline in exports, absence of Coalition Support Fund, and slowdown in remittances as main reason behind soaring current account deficit which has risen to to USD 3.6 billion in the first half of FY17, from USD 1.7 billion in the same period last year.
“This higher deficit was financed by an increase in bilateral and multilateral funding along with pick up in investment flows. Overall surplus in the balance of payments stands at USD 0.2 billion in the first half of the current year”, stated Wathra.
The SBP Governor said low interest rate has resulted in an increase in borrowing by private businesses from banking sector.
Stats revealed that private sector borrowed Rs 375 billion in first half of FY17 as compared to Rs 282.6 billion availed in the corresponding period of last year. Loans for fixed investments increased by Rs 134.1 billion in the first half of FY17 compared with an expansion of Rs 83.8 billion in the same period of last year.
Wathra said that large-scale manufacturing grew by 3.2 percent during the first five months of the current fiscal year and further increase is expected on account of growing infrastructure spending and recent policy support for export oriented sectors.
