State Bank of Pakistan may lower interest rate if inflation eases

WEB DESK: At a recent meeting chaired by Senator Saleem Mandviwala, the Standing Committee on Finance and Revenue delved into the repercussions of the central bank’s 500 basis-point interest rate increase due to IMF pressure. Concerns were raised about its impact on the national debt.

Committee members advocated for reducing the interest rate, particularly if inflation subsides, to alleviate these concerns.

The Deputy Governor of the State Bank of Pakistan (SBP) explained that any decision on the policy rate rests with the Monetary Policy Committee. However, he hinted at future cuts if inflation decreased. The meeting highlighted that even a slight increase in the interest rate significantly escalates national debt, compounding economic challenges.

Senator Mandviwala expressed worry about the high interest rates, leading to a Rs26 trillion accumulation in banks. He emphasised the need to invest this money in the market to generate employment and foster industrial growth, which are essential for the nation’s economy.

Senator Kamil Ali Agha raised concerns about policies’ impact on unemployment, urging dialogue with the IMF to address growing economic issues. He cautioned that if Pakistan’s economic situation worsens, the government might struggle to repay its debt, creating a precarious financial situation.

Read more: Pakistan earns $70.97 million by providing international transport services

On a separate note, the meeting discussed challenges faced by politically exposed persons (PEPs) in opening bank accounts. Each bank has appointed a focal person for PEP-related matters, and an SBP official oversees related processes.

Senators Saadia Abbasi and Agha called for simplified account opening procedures, emphasising that existing regulations infringe upon fundamental rights. State Bank officials assured that they would expedite the account opening process, aiming for a prompt resolution.