Pakistan central bank hikes main policy rate
- 23 May 2022
Pakistan’s central bank raised its benchmark interest rate on Monday by 150 basis points to 13.75%, the second hike in less than two months, as the South Asian nation grapples with a sinking economy.
The key interest rates have been hiked by 400 bps in less than two months, according to the central bank.
“This action, together with much needed fiscal consolidation, should help moderate demand to a more sustainable pace while keeping inflation expectations anchored and containing risks to external stability,” the State Bank of Pakistan (SBP) said in a statement.
The country is going through economic turmoil, including high inflation, reserves declining to as low as less than two months’ of imports and a fast-weakening currency.
Uncertainty over the revival of an International Monetary Fund programme has compounded volatility in the economy and markets amid a political crisis since a new government took over last month from ousted Prime Minister Imran Khan.
The IMF is likely to conclude ongoing talks over a 7th review in Doha. If talks succeed, Pakistan will get a $900 million tranche of the $6 billion rescue package agreed in 2019.
Pakistan’s Finance Minister Miftah Ismail is in Doha, where he is likely to discuss whether to withdraw unfunded subsidies in the oil and power sectors as agreed last month with the IMF.
Khan announced the subsidies in his last weeks in power and they will cost around $2 billion from April to June before Pakistan presents its annual budget.
