Date November 30 ,2011
SBP has announced new monetary policy and has left policy rate unchanged at 12%.
The State Bank of Pakistan (SBP) took the decision after considering the need to revive growth and emerging risks to macroeconomic stability, said a statement from the central bank. The policy rate would stay flat at 12% for the next two months.
The decision was taken at the Central Board Of Directors meeting chaired by SBP Governor Yaseen Anwar in Karachi.
“To promote competition in the banking system and to offer alternative sources of savings to the population, the SBP has been encouraging depositors to invest in government securities through Investor’s Portfolio Securities (IPS) accounts,” the central bank said in its Monetary Policy Decision.
The SBP said the option of maintaining saving deposits or investments in Investor Portfolio Securities (IPS) accounts could provide tough competitions to banks, forcing them to offer better returns on deposits.
“This in turn would incentivise savings and help lower the currency in circulation,” it added.
This will improve the transmission of monetary policy changes to market interest rates. Over time, this strategy would also diversify the government’s funding source, deepen the secondary market of government securities and facilitate the issuance of corporate debt, said the policy decision.
The SBP statement said that the 4-month current account deficit has even crossed the upper limit set for the whole year. The central bank has also pointed out the trend of decline in foreign investment. The bank has also advised the government to breaden the tax net.
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