SBP Cuts Interest Rate by 1% to 12% to Boost Economic Growth.

On Monday (Today, 27th January 2025), SBP (State Bank of Pakistan) announced a cut of 1% of the interest rate, and now the rate is 12%, which was 13%.

SBP today announced that they would cut 100 bps to support economic growth in Pakistan and lower inflation than expected as it allowed SBP to entertain business and the private sector for lending. 

It is reported that the growth rate last year in Pakistan was 0.92% total and shocked many analysts as they were reporting that Pakistan would post around 2% to 3% growth rate; however, that was not the case, and it was reported lower than expected due to a massive tax increase, which forced the shutdown of many industries.

Due to lower demand and lower growth, prices are at a standstill, which the government claims is that inflation is lower; however, that is not the case. Inflation is lower due to lower growth, by managing import numbers to control exchange rates and trade deficits. However, this is all done by the government, and they are forced to do it simply because the government did not do major reforms that were required, and they are shy about doing surgery which is required.