Pakistan's central bank has cut its key policy rate by 25 basis points to 5.75 per cent which is lowest in 40 years, in view of the dismal performance by the agriculture sector.
The Gross Domestic Product (GDP) only grew by 4.7 per cent against the target of 5.5 per cent.
Pakistan had missed the economic growth target for the current financial year by a wide margin due to widespread dismal performance by the agriculture sector, experts said.
The State Bank of Pakistan (SBP) yesterday in its monetary policy statement slashed its policy interest rate from six per cent to 5.75 per cent, lowest in 40 years, as per its assessment that inflation would remain below the target set for the 2016 financial year.
The policy rate was previously cut by 50 basis points to six per cent in September last year and since then the central bank has been maintaining it.
Financial analysts, trade and industry experts said the cut in policy rate can not alone bring an improvement in the country's economic growth and insisted the government also has to take adequate measures to encourage and uplift the manufacturing sector.
The SBP said the country would not achieve its GDP growth target of 5.5 per cent for this year's financial year ending on June 30, but it would exceed its last year's outcome of 4.2 per cent.
The losses from cotton and rice crops were one reason for the slow economic growth but an increase in industrial activities and services sector would salvage some of the lost momentum to GDP growth but it cautioned that uncertainty might arise if there was an adverse change in oil prices or workers remittances, it said.
Inflation was likely to attain a higher plateau in the next financial year, as rising global oil prices, imposition of new taxation measures and increase in electricity and gas tariffs would put upward pressure on CPI inflation.
It said that recovery in large-scale manufacturing, which grew by 4.7 per cent during Jul-Mar FY16 compared to 2.8 per cent in Jul-Mar FY15, was expected to continue further on account of improving energy and security conditions.
