Expert urges SBP to ‘significantly’ cut interest rate amid Coronavirus outbreak, oil slump

• The policy that we have implemented in December is not relevant anymore, says Salman.
• The State Bank of Pakistan (SBP) has left the interest rate at 13.25 percent, the central bank will announce the Monetary Policy on 17^th March 2020.

Amid the rising impact of coronavirus on the global economy and decline in oil prices, it is imperative for Pakistan central bank to cut its interest rates said an economic expert.

“It’s high time that the central bank should reduce the interest rate significantly, as the policy that we have implemented in December is not relevant anymore,” said Dr. Salman Ahmed, Chief Investment Strategist at Lombard, while talking to a private channel.

“The outflow of money is not due to Pakistan, it is a global trend as risk aversion has increased among the investors. It is important to cut the interest rate, otherwise, it would become a liability to the economy,” he added.

The State Bank of Pakistan (SBP) has left the interest rate at 13.25 percent, the central bank will announce the Monetary Policy on 17^th March 2020.

“There is a global recession around the corner, which would be short-term but very intense and on top of that, the dwindling oil prices is making the matters worse. We have to see that the current interest rate is completely out of synch with the current situation,” he said.

Talking about the spread of novel coronavirus and its impact on the global economy, Ahmed said that the economic pressure would be ‘catastrophic’ to several sectors of the economy.

“What we have seen till now, that the only way to stop the spread of this virus is a complete lockdown, which was done by China. If similar lockdowns take place in Europe and the United States, the economic pressure generated would be catastrophic to several sectors of the economy.

“Another factor that is playing up is Liquidity i.e. with how much ease one can trade these instruments, and due to regulations after 2008-09, this has become even more difficult. What we are witnessing in the markets is that liquidity has completely vanished in a sense, that people want to sell their stocks but there aren’t any buyers, which has exaggerated the situation,” he said.