Pakistan Cuts Rate for Second Time This Year as War Hits Growth: Bloomberg

By Khalid Qayum and Farhan Sharif

Aug. 16 (Bloomberg) -- Pakistan cut interest rates for the second time this year as a war against Taliban insurgents threatens an already “anaemic” economy.

State Bank of Pakistan lowered its benchmark discount rate to 13 percent from 14 percent, Central Bank Governor Salim Raza said at a news conference in Karachi yesterday. All 12 economists surveyed by Bloomberg News expected the central bank to reduce borrowing costs.

The Pakistan Peoples Party-led government is betting lower interest rates will revive the confidence of investors, who have shied away from the country because of militancy in the northwest region and a near-stagnant economy. The International Monetary Fund this month agreed to increase a loan to Pakistan to $11.3 billion from the $7.6 billion approved in November to bolster the nation’s “anaemic” growth.

“The challenge for policy makers is growth,” said Sayem Ali, an economist at Standard Chartered Plc in Karachi. “The inflationary cycle appears to be coming to an end.”

Raza has this year lowered borrowing costs by two percentage points from a decade high, taking advantage of the slowest inflation in 19 months.

“The revival will be slow and sporadic,” Raza said yesterday. “Power shortages and security issues have hurt growth. The likely increase in oil and power costs may renew inflationary pressure.”

Six Times

The central bank will announce monetary policy six times a year every alternate month instead of every quarter, Raza said. The next announcement will be in the last week of September.

The monetary policy committee will be expanded to include independent experts, in line with “best international practices,” he said.

The governor unexpectedly postponed State Bank of Pakistan’s monetary policy statement to yesterday from its initially scheduled release on July 25.

The delay may have been due to “fiscal slippages” resulting from declining tax revenue and “substantial” military expenditure that forced the government to borrow from the central bank for deficit financing, according to Ali from Standard Chartered.

The central bank also introduced a “corridor” for the overnight repurchase rate, Raza said. The discount rate will be a ’’ceiling’’ and the rate on the new overnight deposit facility, 300 basis points below the discount rate, will provide a “floor,” he said.

Policy makers last raised borrowing costs by 2 percentage points on Nov. 12, the fourth increase in 2008, as part of conditions for the IMF loan and to curb inflation that reached a 30-year high.

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Pakistan May Cut Rate for Second Time This Year to Stoke Growth: Bloomberg

By Khalid Qayum and Farhan Sharif

Aug. 13 (Bloomberg) -- Pakistan’s central bank will probably lower its benchmark interest rate for the second time this year to help boost economic growth.

State Bank of Pakistan will cut its discount rate by between 1 and 2 percentage points from 14 percent, according a Bloomberg News survey of 12 economists. Governor Salim Raza is due to release the central bank’s quarterly monetary policy statement on Aug. 15 in Karachi, after the announcement was delayed from the previously scheduled date of July 25.

The case for reducing rates “has been strengthened by the sharp drop in inflation,” said Asad Farid, an economist at AKD Securities Ltd. in Karachi. “It is very critical that finance costs be lowered now. If they aren’t, industry, which is already facing huge problems, will not be competitive.”

The Pakistan Peoples Party-led government is betting lower interest rates will revive the confidence of investors, who have shied away from the country because of militancy in the northwest region and a crumbling economy. The International Monetary Fund agreed to increase a loan to Pakistan by $3.2 billion on Aug.8, after the country was forced to turn to the Washington-based lender for a $7.6 billion bailout in November.

Governor Raza in April cut the benchmark rate one percentage point to 14 percent from a decade high. Policy makers last raised borrowing costs by 2 percentage points on Nov. 12, the fourth increase in 2008, as part of conditions for the IMF loan and to curb inflation that reached a 30-year high.

Slowing Inflation

Consumer prices rose 11.17 percent in July from a year earlier, the slowest pace in 19 months. Large-scale manufacturing output fell 8.5 percent in the 11 months ended May 30, according to the statistics agency.

South Asia’s second-largest economy was forced to turn to the IMF for a rescue package to avoid defaulting on its debt, after the country’s foreign-exchange reserves shrunk 75 percent in a year to $3.5 billion and the current-account deficit widened to a record.

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Pakistan May Lower Key Rate for Second Time This Year: Bloomberg

By Khalid Qayum

July 24 (Bloomberg) -- Pakistan’s central bank will probably lower its benchmark interest rate for the second time this year to help boost economic growth.

State Bank of Pakistan will cut its discount rate to 12.5 percent from 14 percent, according to six of 13 economists in a Bloomberg News survey. Six expect the rate to be reduced by 1 percentage point, while one predicts a 2 percentage-point cut.

“In view of the economic slowdown, slashing interest rates is inevitable,” said Muzzammil Aslam, senior economist at JS Global Capital Ltd. in Karachi. “If economic activity doesn’t pick up now, it will be difficult for the government to meet its macro targets for this year.”

The Pakistan Peoples Party-led government is betting lower interest rates will revive the confidence of investors, who have shied away from the country because of poor security, militancy in the northwest region and a crumbling economy. The South Asian nation was forced to seek a $7.6 billion bailout from the International Monetary Fund in November and may require an additional $4 billion from the Washington-based lender.

Governor Salim Raza is due to release the central bank’s quarterly monetary policy statement on August 15 in Karachi, after the announcement was today delayed from the previously scheduled date of July 25. Raza in April cut the benchmark rate one percentage point to 14 percent from a decade high.

IMF Pressure

“There must have been pressure from the IMF to wait for July inflation numbers,” said Mustafa Pasha, an economist at BMA Capital Management Ltd. in Karachi. “The IMF probably wants the central bank to be conservative in a rate cut and the central bank probably wants the IMF to first release the third loan installment.”

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Pakistan’s Inflation Slows, Giving Room for Rate Cut : Bloomberg

By Michael Dwyer

July 9 (Bloomberg) -- Pakistan’s inflation slowed to a 16- month low in June, giving the central bank scope to reduce interest rates to prop up a faltering economy.

Consumer prices in South Asia’s second-largest economy rose 13.13 percent from a year earlier after gaining 14.39 percent in May, the Federal Bureau of Statistics said on its Web site today. That matched the median 13.1 percent forecast in a Bloomberg News survey of nine economists.

Pakistan’s economy has ground to a near halt as the global recession erodes exports and investment and Taliban insurgents launch terrorist attacks in response to an intensified military campaign against Islamic extremists. The $146 billion economy may expand as little as 0.8 percent in the year to June 2010, according to HSBC Holdings Plc, the weakest pace since 1952.

Security concerns may “hamper growth over the coming year as investors and consumers further rein in spending,” said Frederic Neumann, an economist at HSBC in Hong Kong. “The good news is that the central bank can begin to relax and start cutting interest rates, which should eventually nurse a recovery.”

State Bank of Pakistan Governor Syed Salim Raza has already begun reducing borrowing costs, slashing interest rates in April for the first time since 2002. The central bank is due to release its next monetary policy statement in Karachi at the end of this month.

‘Toughest Decision’

Pakistan was forced to turn to the International Monetary Fund for a $7.6 billion rescue package in November after its foreign reserves shrank 75 percent in a year to $3.45 billion, its current-account deficit widened to a record and inflation soared to a three-decade high.

Former Governor Shamshad Akhtar raised the central bank’s policy rate by the most in more than a decade on Nov. 12, a move she described as “the toughest decision of my life,” in order to secure the IMF bailout.

Higher borrowing costs damped spending and investment in an economy already slowing amid the global downturn, which has reduced the nation’s overseas shipments and the amount of money that Pakistanis working abroad send home.

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Interest rate may be cut to 12pc: The News

KARACHI: Board of Investment Chairman Saleem H Mandviwalla has said interest rate may be cut to 12 per cent from 15 per cent after the government reviews the benchmark interest rate in March this year.

Besides that, “the government is bringing an industrial package, including new laws for the gems and stone sector,” he said.

He was speaking to industrialists at a seminar on ‘Public-Private Partnership’, organised by the Karachi Chamber of Commerce and Industry (KCCI) and its Infrastructure Management Unit (IMU) on Saturday.

He said the BoI was doing its best to include more and more private sector people in the public sector in order to make progress through public-private partnership.

He said the government had also made agreements for purchasing hybrid seed from China to improve per acre yield of crops and produce more food. “Hybrid seed will increase our per acre yield up to three times,” he added.

BoI Sindh Chairman and businessman Zubair Motiwala said the public-private partnership mechanism had always been productive all over the world whether they were developed or underdeveloped countries. He said the BoI would take all measures to exploit all possible areas of development including fish farming, corporate farming and agriculture in general.

A businessman invited the attention of BoI officials to smuggling of stationary and lubricant items from the Chinese border, to which Zubair Motiwala replied that the government should do something to control smuggling. “There are a variety of goods being imported into Pakistan under the Afghan Transit Trade Agreement (ATTA), which never went to Afghanistan and damaged local industries.

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Pakistan Raises Interest Rates Ahead of IMF Bailout: Bloomberg

By Khalid Qayum and Farhan Sharif

Nov. 12 (Bloomberg) -- Pakistan's central bank increased its benchmark interest rate by 2 percentage points, the most in more than a decade, as the government seeks a loan from the International Monetary Fund to avoid defaulting on its debt.

The State Bank of Pakistan raised the discount rate at which it lends to commercial banks to 15 percent, Governor Shamshad Akhtar said today in Karachi. The increase was part of conditions for an IMF loan, said Ahsan Iqbal, a spokesman for the Pakistan Muslim League-Nawaz party and former deputy chairman of the Finance Ministry's planning commission.
``It was the toughest decision of my life,'' Akhtar told reporters. ``The IMF program will be good for Pakistan as we need to be disciplined.''

Pakistan has been forced to seek funds from the IMF after its foreign reserves shrunk to $3.5 billion as of Nov. 1 from $14.2 billion a year ago, raising concern the country will not be able to pay the $3 billion in debt-servicing costs due in the next 12 months. Higher borrowing costs may also tame inflation, which accelerated to near a three-decade high in October.

For more on this article, please click on the following link: Pakistan Raises Interest Rates Ahead of IMF Bailout: Bloomberg