Finance Minister Ishaq Dar has welcomed announcement by the State Bank of Pakistan (SBP) to lower its policy rate, saying it would spur business and economic activities in the country.

The minister said that decision by the SBP to reduce policy rate from 8% to 7% is a manifestation of improvement in macroeconomic conditions as reflected in multi-year low inflation and considerably improved external account. The current CPI inflation of 4.8% in the first ten months of the current fiscal year supports the decision of the SBP, he further said. Finance minister said that this historical reduction in the interest rate is now expected to be translated into significant decline in the market interest rates. With already a significant decline in inflation containing increase in cost of production, the decline in interest rate provides a golden opportunity to the industry and other borrowers to expand their current business activities and increase their investment in Pakistan, he added.

“Indeed, with stable banking system, increased construction activity, and buoyant investor confidence, the private sector credit should pickup both for working capital as well as for fixed investment. This will further contribute towards the acceleration in GDP growth for fiscal year 2015-16, the finance minister remarked.