Pakistan cut its benchmark interest rate as the central bank seeks to encourage economic growth amid falling oil prices.
Governor Ashraf Mahmood Wathra lowered the target policy rate to 6 percent from 6.5 percent, the State Bank of Pakistan said in a statement on its website on Saturday. The move was predicted by 11 of 21 economists in a Bloomberg survey, with the rest seeing no change. The country also cut its discount rate to 6.5 percent from 7 percent.
“For another year and a half we don’t see rates bouncing back unless oil bounces back,” Mohsen Siddiqui, portfolio manager at Abbasi Securities Pvt., said by phone from Karachi before the decision. “So far we see downward volatility in oil prices.”
Brent crude has tumbled about 50 percent over the past year. Pakistan’s exports fell in August for the fourth straight month, imperiling Prime Minister Nawaz Sharif’s goal of spurring economic expansion to the fastest since 2008.
“Recent increases in gas prices and their likely second round impacts would be offset by lower global oil price that has yet to find the bottom,” the central bank said in its statement.
Pakistan raised the price of natural gas this month for different industries to lower subsidies and meet the terms of an International Monetary Fund loan. The largest gas-price increase was a 63 percent surge for some fertilizer manufacturers, Oil Minister Shahid Khaqan Abbasi said in August.