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Pakistan Cuts Interest Rates, Sets $6 Billion To Offset Economic Impact Of Virus

25 Mar 2020 Gandhara - RFE/RL

ISLAMABAD -- Pakistan has announced a financial-relief package of some $6 billion and cut its benchmark interest rate for the second time in a week in an effort to counter the divesting effects of the coronavirus pandemic on the economy.

Prime Minister Imran Khan on March 24 said up to 200 billion rupees ($1.26 billion) of the aid would go as payments to laborers to help families to counter the adverse effects caused by COVID-19.

Funds will also go to food and energy subsidies and on measures to boost agriculture, Khan said.

Separately, the State Bank of Pakistan announced it was slashing its key interest rate from 12.5 percent to 11 percent, a week after the rate was reduced from 13.25 percent.

The moves come as countries around the world intensify measures to rescue their economics in the face of dramatically reduced demand due to the coronavirus epidemic.

Khan also told reporters that there would be a 15-rupee (about $0.10) decline per liter in the price of gasoline and diesel.

Other measures included a 100 billion-rupee ($630 million) tax rebate for the export sector, with a similar amount to be set aside to aid small and midsize businesses and the agriculture sector.

Low-income families will receive cash payments of 3,000 rupees ($19) a month for the next four months.

Taxes on items such as sugar and wheat will be reduced or eliminated, and the government will also provide assistance to users of electricity and to medical workers.

"We will have to protect poor and make sure they have food on the table," Khan told the news conference.

The prime minister said more than 1 trillion rupees ($6.3 billion) will be taken from the government's coffers to fund the aid and stimulus packages.

The government has confirmed 906 cases of coronavirus infection with seven deaths, although most experts caution that the true number of cases in any country is impossible to determine because of a lack of testing.

Hospitals in the capital and other cities have reported long lines of people attempting to get tested for the potentially deadly disease.

Pakistan has suspended all international flights to and from the country, while provincial governments have imposed lockdowns in several cities in a bid to stem the spread of the virus.

Even before the crisis, Pakistan's finances had been in a precarious situation.

In July 2019, Islamabad turned to the International Monetary Fund for a $6 billion bailout package and has since been attempting to exhibit more disciplined financial policies to satisfy the Washington-based lender's requirements.

With reporting by Reuters and dpa
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