World News | State Bank of Pakistan Raises Cash Reserve Requirement of Banks by 1 Pc to Curb Inflation

Karachi [Pakistan], November 14 (ANI): The State Bank of Pakistan (SBP) on Saturday raised Cash Reserve Requirement (CRR) by one percentage point for scheduled banks for the first time in 13 years in a bid to curb rising inflation in the country.

"[The] SBP has decided to increase the average Cash Reserve Requirement (CRR) to be maintained during a period of two weeks by scheduled banks, from 5 per cent to 6 per cent and minimum CRR to be maintained each day from 3 per cent to 4 per cent," the central bank said in a statement, reported Geo News.

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Revised average CRR of 6 per cent will be effective from November 12, 2021, whereas the revised daily minimum requirement of 4 per cent will be effective from November 15, 2021, said SBP.

CRR is the amount of money that banks are required to keep with the SBP and is applicable on demand liabilities and time liabilities with the tenor of less than a year. Time liabilities with the tenor of more than one year will continue to be exempted from the maintenance of cash reserves.

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The SBP raised the cash reserve ratio for banks for the first time in 13 years to curb excess liquidity on the banking system, which analysts had said is contributing to inflation, reported Geo News.

Inflation accelerated 9.2 per cent in October from 9 per cent in September, as Pakistanis paid more for energy and food and analysts said inflation could stay uncomfortably high well into fiscal year 2021/22 amid a weak rupee and strong commodity prices globally.

"With the economy recovering briskly from last year's acute COVID-19 shock, there is a need to gradually normalise policy settings, including the growth of monetary aggregates," the SBP said.

"In recent months, real money supply growth has drifted above its trend." The bank said measures will moderate money supply growth "as well as domestic demand, thereby helping to sustain the current economic recovery, achieve the government's medium-term inflation target, and reduce pressures on the rupee", reported Geo News.

Moreover, the rupee plunged to a record low of 176 against the dollar in intra-day trading before closing at 175.73 this week. The rupee is under pressure due to increased dollar demand from importers to make payments. Besides this, traders and investors are also worried about the future of the IMF's USD 6 billion worth loan facility. (ANI)

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