Governor State Bank of Pakistan gives warning

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Governor State Bank of Pakistan gives warning

State Bank of Pakistan (SBP) Governor Dr Reza Baqir has warned that emerging markets are vulnerable to a taper tantrum-style shock if advanced economies do not act sooner to manage rising global inflation, reported the *Financial Times*.

His statement comes on the heels of the central bank adopting a more aggressive stance, raising the key interest rate by 150 basis points to take it to 8.75% — the highest since April 2020. The decision comes amid higher inflation in Pakistan that has gone over 9%, with hike in global energy prices cited as among the top reasons.

His remarks signal growing unease among developing-economy policymakers that central bankers in rich countries are not doing enough to rein in pandemic-era monetary stimulus and combat rising prices, added the report.

This will disproportionately hurt developing countries if foreign investors end up dumping emerging and frontier-market assets owing to unexpected interest-rate rises in advanced economies, Baqir said in an interview with the *Financial Times*.

Central banks, much like Pakistan's, are under pressure to wind back the stimulus programmes introduced during the coronavirus pandemic over concerns that easy money was fuelling sustained global inflation.

Policymakers and investors fear that inaction could spark a repeat of the 2013 taper tantrum when the US Federal Reserve’s signalling of stimulus withdrawal sparked an emerging market sell-off.