Pakistan interest rate unchanged at 15%

By Piscean -
Pakistan’s central bank on Saturday kept its key discount rate unchanged at 15 per cent amid warnings of a significant economic slowdown and demands from businessmen for interest rate cuts.”

We are going to have lower industrial growth than most years but services and agriculture will grow near to normal levels to give us GDP growth rate of about 3.7 per cent” said Salim Raza Pakistan’s central bank governor in his first monetary policy statement since taking charge about a month ago. 

Businesses however demanded interest rate cuts to make bank borrowing more affordable in a period marked by the effects of an economic slowdown. 

The latest estimates on Pakistan’s industrial performance showed car sales fell by about 48 per cent in the second half of 2008 compared to the same period a year ago.

”Interest rates have to be reduced in order to tackle this situation. The business sector is suffering very badly” said Tahir Malik vice president of the Lahore Chamber of Commerce and Industry (LCCI) the business chamber of Pakistan’s second largest city.

Central bank officials said it was difficult for them to immediately cut interest rates as they are grappling with 25 per cent inflation. 

Pakistan driven by a balance of payments crisis in November was received a US$7.6b rescue package from the International Monetary Fund (IMF). An IMF official said Pakistan on Friday met its IMF performance criteria for end of 2008 paving the way for further disbursements.

A senior western economist in Islamabad said the central bank’s decision to leave interest rates unchanged showed that agriculture a key economic driver had not been hurt by the high cost of borrowing. 

”More than half of Pakistan’s population depends on agriculture. Those are the people who are not suffering from high interest rates as industrial producers” he said. ”The government can probably afford high interest rates till inflation is brought under control”.


Author: Farhan Bokhari
Posted On: Monday, February 02, 2009
Source
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