ISLAMABAD:Federal Finance Minister Muhammad Aurangzeb has said there is room to reduce the interest rate, but any such decision rests solely with the State Bank of Pakistan (SBP).
The State Bank of Pakistan (SBP), in its last meeting, held the key policy rate steady at 11%, citing inflationary risks and external uncertainties triggered by the Iran-Israel conflict.
The central bank had lowered the interest rate by 100 basis points (bps) to 11% on May 5. The central bank had cut the rate by 1,100 basis points since June from an all-time high of 22%.
Speaking to journalists in Karachi today, Aurangzeb stated that the economy is now on a path to stability due to the removal of structural barriers. “The government’s steps have begun yielding results, and economic indicators are improving,” he said.
He highlighted that both local and foreign investors are now being engaged in efforts to boost economic growth. “Multinational companies repatriated $2.3 billion in profit in the fiscal year ending June 30, a sign that issues like blocked profit repatriation and letters of credit have been resolved,” the finance minister noted.
He stressed that banks must play a role in reviving ailing industrial units and should be active participants in the privatisation process.
“We have asked commercial banks and the SBP how they plan to contribute to economic stability. Their role is vital,” Aurangzeb added, following a meeting with the central bank governor and heads of commercial banks.
Aurangzeb clarified that the Federal Board of Revenue’s (FBR) new enforcement powers are linked to sales tax, not income tax. He also announced the simplification of the tax return filing process for salaried individuals and small businesses.
“An easy tax form is now available on the FBR website. It will also be offered to small traders and SMEs,” he said.
Answering a question about fiscal relief, he said: “We’ve provided as much relief to salaried individuals as possible within the available fiscal space.”
He added that while every finance minister wishes for rapid growth, such a move would strain foreign exchange reserves. Therefore, any decision to reduce the interest rate must be carefully evaluated and is ultimately the prerogative of the SBP.