Pakistan cuts policy rate by 100 basis points to 11 pct

ISLAMABAD, May 5 (Xinhua) -- The State Bank of Pakistan (SBP) announced on Monday a cut in the policy rate by 100 basis points to 11 percent with effect from May 6, citing easing inflation and improved economic indicators, said a statement.

In its statement, the central bank said headline inflation dropped to 0.3 percent year-on-year in April, driven by lower food and energy prices, including declines in wheat costs, global commodities, and electricity tariffs.

Core inflation eased to 8 percent in April after hovering around 9 percent in recent months. The bank expects a gradual rise, with inflation stabilizing within the 5 to 7 percent target range, though risks remain from food and energy prices, supply disruptions, and global commodity uncertainty.

The central bank noted that provisional real gross domestic product (GDP) growth for the second quarter of fiscal year 2024-25 reached 1.7 percent year-on-year, while growth for the first quarter was revised upward from 0.9 percent to 1.3 percent.

On the external front, the SBP highlighted a current account surplus of 1.2 billion U.S. dollars in March, mainly supported by record-high workers' remittances. These inflows, along with SBP's foreign exchange purchases, helped mitigate the impact of large external debt repayments on the central bank's reserves.

According to the statement, recent surveys indicated improved consumer and business sentiment. However, the bank flagged a widening shortfall in tax revenue and rising global uncertainty, particularly related to trade tariffs.

The bank concluded that the real policy rate remains adequately positive to guide inflation toward the target range while supporting sustainable economic growth. ■