The State Bank of Pakistan has made a significant move to support the country’s economic growth by announcing a 1% reduction in its interest rate. This decision, made by Governor Jameel Ahmad, brings the interest rate to 12%, aiming to stabilize the economy and boost business activities in the country.

In his announcement on Monday, Governor Jameel Ahmad explained that the decision is part of the bank’s broader strategy to foster economic stability and promote commercial activities. With this reduction, the cost of borrowing will decrease, facilitating easier access to loans and providing much-needed financial relief to the public.

The Governor also provided an overview of the country’s economic situation, highlighting the progress made in the last few months. Notably, the inflation rate had decreased to 4.1% by December 2024, signaling a positive shift in the economic environment. Additionally, Pakistan’s current account deficit has shown a remarkable turnaround, moving from a deficit of $582 million to a surplus, which is seen as an encouraging development for the country’s economic health.

Governor Ahmad also pointed out that during the first half of the current fiscal year, Pakistan’s current account deficit stood at $1.02 billion, but the recent improvements in the deficit and inflation were optimistic signs for the year ahead.

The country’s foreign exchange reserves are currently at $16.19 billion, further adding to the confidence in the economy’s resilience. These reserves are considered a vital indicator of the country’s financial stability, offering a cushion against external shocks.

Experts had anticipated this rate cut due to a decrease in inflationary pressures, and many businessmen have called for further reductions to help stimulate the economy. Traders, in particular, have urged the government to bring the interest rate into single digits to help promote business activity and accelerate economic recovery.

The move by the State Bank is expected to have a positive impact on Pakistan’s financial landscape by making credit more affordable, encouraging investment, and improving the overall business climate. As the country continues to navigate its economic challenges, this interest rate cut is seen as a critical step in ensuring sustainable growth and stability.