Interest rate remains unchanged at 10 percent

21st July 2015

 
 

In its bi-monthly monetary policy review, the State Bank of Pakistan (SBP) has decided to leave the interest rate unchanged at 10 percent. Although the State Bank Governor, Ashraf Wathra, stated that economic conditions have significantly improved in the last year, he deemed that ‘challenges and vulnerabilities remain’.

The last interest rate revision was conducted in November 2013, when the discount rate was raised to 10 percent. The central bank has maintained this level despite low levels of inflation - presently at 8.6%, and stable foreign exchange reserves at $9.4 Billion in July.

How does this affect the ordinary consumer? The anticipation for a discount rate reduction has warded off consumers from availing lending facilities from the banking sector in the past. Since most collateral based products are linked to the economy’s discount rate, why should one pay extra markup if there is talk of rate reduction. The high markup rate has also proved as a deterrent to small and medium businesses in availing financing for expanding their operations. With the interest rate now locked at 10% for the next two months, consumers and small businesses will either have to avail their desired facilities at higher costs, or hold off on projected expenditures for another two months.

 

 
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