SBP urged to cut policy rate to 17.5pc

Policy Research and Advisory Council (PRAC) Chairman Mohammad Younas Dagha has urged the State Bank of Pakistan (SBP) to bring down its policy rate to 17.5 per cent from 19.5pc. He said this would keep the real interest rate positive within a range of 2.4-3.4pc, as per the International Monetary Fund’s requirement. According to a PRAC press release issued on Tuesday, Mr Dagha said the government’s target of 3.6pc real GDP growth is achievable only if the real interest rate is lower than the projected growth rate, ensuring sustainable debt levels. The FY25 budgetary measures are expected to increase inflationary pressures by 3-4pc pushing inflation to around 15pc, he added. He said that SBP’s decision to lower the policy rate to 19.5pc was a step in the right direction but there was scope to reduce it further as inflation sharply decelerated in recent months, from 38pc in May 2023 to 11.1pc in July.