In a major development, the State Bank of Pakistan (SBP) reduced the policy rate by 100 basis points (1 percent) on Friday.

The much-awaited decision was made as the SBP announced the Monetary Policy Statement (MPS) today (Friday). The latest drop means the interest rate is at its lowest in the last 19 months, which will also bring down the foreign debt by around Rs330 billion.

The fresh cut means that the policy rate has been reduced by 5.25 percent during the last two months after which the interest rate currently stands at 8 percent.

Last month, the central bank’s Monetary Policy Committee (MPC) had reduced the policy rate by 2 percent after a 1.5 percent cut in March.

However, many in the business community won’t be satisfied by the latest decision as some of them were calling for 2 per cent reduction in the interest rate.

The interest rate have been slashed around the world in an attempt to mitigate the effects of the coronavirus pandemic.

However, the government had been facing criticism for very high interest rate even before the pandemic as industrialists and businessmen view it hindrance in economic development amid higher cost of doing business and a reduced purchasing power.