State Bank of Pakistan reduces markup rate to 7 percent

The State Bank of Pakistan has reduced the markup rate on investment under SBP’s Temporary Economic Refinance Facility (TERF) to 5% (from 7%) and on Long Term Financing Facility.

According to the details, SBP reduces markup rate on investment under SBP’s Temporary Economic Refinance Facility (TERF) to 5% (from 7%) and on Long Term Financing Facility for non-textile sector to 5% (from 6%) to extend the benefit of the recent reductions in policy rate.

1/2 SBP reduces markup rate on investment under SBP’s Temporary Economic Refinance Facility (TERF) to 5% (from 7%) and on Long Term Financing Facility for non-textile sector to 5% (from 6%) to extend the benefit of the recent reductions in policy rate.

— SBP (@StateBank_Pak) July 8, 2020

State Bank of Pakistan has also allowed TERF facility in cases where LCs/Inland LCs were opened prior, but retiring after the introduction of scheme on 17Mar20. TERF was introduced to provide a time bound incentive for investment in all sectors.

2/2 SBP has also allowed TERF facility in cases where LCs/Inland LCs were opened prior, but retiring after the introduction of scheme on 17Mar20. TERF was introduced to provide a time bound incentive for investment in all sectors. https://t.co/Ix46d0uO6C

— SBP (@StateBank_Pak) July 8, 2020

Earlier State Bank of Pakistan announced that it is further reducing the policy rate of the country by 1%, bringing it to 7%.

SBP’s Monetary Policy Committee (MPC) met and agreed to reduce the policy rate by 100 basis points to 7%.

State Bank said, “This decision reflected the MPC’s view that the inflation outlook has improved further, while the domestic economic slowdown continues and downside risks to growth have increased,”

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The committee recorded that it was an “opportune moment” to take action from a monetary policy transmission perspective as “approximately Rs3.3 trillion worth of loans are due to be repriced by early July 2020”.

“In this way, the benefits of interest rate reductions would be passed on promptly to households and businesses,” said the statement.

The MPC also noted that IMF in its latest report has downgraded its 2020 global growth forecast further to -4.9%.

The MPC also noted that domestically headline inflation declined further to 8.2% in May on the back of the recent cut in diesel and petrol prices. It also stated that month-on-month inflation rates also continue to below.