FinMin Aurangzeb hints at further policy rate cut amid lower inflation

• Electricity tariffs reduced; further energy cost relief expected.
• Privatisation drive and right-sizing of 45 ministries underway.
• Panda Bonds planned by year-end says FinMin Aurangzeb.

ISLAMABAD: Finance Minister Muhammad Aurangzeb on Wednesday indicated there was room for further reduction in Pakistan’s policy rate during the ongoing calendar year, citing a decline in both average and core inflation.

“At present, the policy rate is at 11%. I am always very careful that the policy rate and the market-based exchange rate are very much the purview of the central bank, the State Bank of Pakistan, and the Monetary Policy Committee,” Aurangzeb said.

“Having said that, my own view, and I am giving my personal view here, is that given the current inflation, whether it is the average inflation or the core inflation, I do think there is room to do more in terms of the policy rate, and I am very hopeful that during the course of this calendar year we will see movement in the policy rate going south,” he added.

The central bank left its key interest rate unchanged at 11% on July 30, going against analyst expectations.

The bank, held the rate steady, saying the inflation outlook had deteriorated due to rising energy prices.

The next policy rate announcement is due on September 15, according to the State Bank of Pakistan's calendar.

The finance czar linked monetary easing to broader economic progress, saying national security and economic stability are interdependent. He noted that multiple economic indicators were showing improvement, including a 60% surge in the stock exchange alongside an increase in new investors.

“We are heading in the right direction,” he told reporters, adding that the government was committed to providing a better environment for the business community and encouraging the private sector to lead the economy. “Our economic and financial achievements are being recognised globally. There is hope for further improvement in the coming days.”

The minister said company registrations had risen by 250,000, loans to the private sector were up 38%, and the government had paid one trillion rupees in debt servicing over the past year. He also pointed to reduced electricity tariffs, expected improvements in energy costs, and ongoing reforms in tax administration.

On the fiscal side, Aurangzeb said the federal government had begun a right-sizing process for 45 ministries and departments, and the privatisation of state-owned enterprises would accelerate. Agreements with China were also in progress, alongside plans to issue Panda Bonds by year-end.

Extending Independence Day greetings, he emphasised the sacrifices behind Pakistan’s identity and urged unity in working towards a prosperous future.

- With input from Reuters