Thursday Mar 23, 2023
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SBP likely to further hike interest rate on IMF demand

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IMF logo on a building. — Reuters/File
IMF logo on a building. — Reuters/File

KARACHI: In another bid to unlock the International Monetary Fund (IMF) programme, the State Bank of Pakistan (SBP) is likely to further raise the interest rate by 2% during its upcoming meeting of the Monetary Policy Committee (MPC), reported The News.

The staff-level agreement between the IMF and Pakistan was scheduled to take place on February 9. However, the government failed to convince the global lender.

The Shehbaz Sharif-led government is taking desperate measures to get the much-needed funds, but the IMF is not satisfied with the prior steps taken by the incumbent government.

The sources said that the IMF demanded Pakistan to jack up the interest rate by 4%. The fund was of the view that inflation was lower in Pakistan as per the interest rate.

The SBP recently raised the interest rate by 2% but now the IMF is forcing Islamabad to again increase the interest rate by 2%.

It has been learnt that the SBP’s MPC will meet on April 4 to review the interest rate on IMF's demand.

The sources further said the SBP will increase the interest rate by 2% as agreed with the Fund.

On March 2, in a surprise move, the SBP raised the monetary policy rate by 300 basis points to 20%.

“This decision reflects deterioration in inflation outlook and its expectations amid recent external and fiscal adjustments. MPC believes this outlook warrants a strong policy response to anchor inflation expectations around the medium-term target of 5%-7%,” the SBP had said in a statement.