Pakistan central bank cuts interest rates growth lag

KARACHI: State Bank of Pakistan cut its key policy rate by 25 basis points to 5.75 percent on Saturday, saying the country was on course to miss its economic growth target for the year.The bank said economic growth in the fiscal year ending June 2016 was likely to exceed last year’s 4.2 percent but miss the 5.5 percent target.The bank also said the inflation outlook was “low” despite headline inflation nudging up for seven consecutive months.The annual consumer inflation rate rose to 4.17 percent in April from 3.94 percent in March.Economists say Pakistan, a nation of 190 million people, needs to expand by at least 6 percent a year to absorb new entrants to the work force.In a statement, the bank said growth in the service sector and industrial activities would offset poor performance in the agricultural sector.There has also been an uptick in lending. “GDP growth in FY16 is expected to provide the needed sustainability in growth trajectory and the basis for further improvement in FY17,” the bank said in a statement.It added that foreign exchange reserves are expected to continue building, while the current account deficit will be at around 1 percent of GDP.Potential headwinds for the economy may come from an increase in global oil prices, the bank said.Pakistan is a net importer of oil.