KARACHI – The State Bank of Pakistan (SBP) on Thursday increased thebenchmark interest rate by a significant 300 basis points (bps), taking itto 20% as Pakistan is desperate to unlock the International Monetary Fund(IMF) deal.
“At its meeting held on 2nd March 2023, the Monetary Policy Committee (MPC)decided to increase the policy rate by 300 basis points to 20 percent,” itsaid.
The MPC statement said that in today’s meeting, the committee noted thatthe recent fiscal adjustments and exchange rate depreciation have led to asignificant deterioration in the near term inflation outlook and a furtherupward drift in inflation expectations, as reflected in the latest wave ofsurveys.
“During the last meeting in January, the Committee had highlightednear-term risks to the inflation outlook from external and fiscaladjustments. Most of these risks have materialised and are partiallyreflected in the inflation outturns for February. The national CPIinflation has surged to 31.5 percent y/y, while core inflation rose to 17.1percent in urban and 21.5 percent in rural basket in February 2023.
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“The Committee expects inflation to rise further in the next few months asthe impact of these adjustments unfolds before it begins to fall, albeit ata gradual pace,” it added.
Pakistani rupee plunged drastically to approach an all-time low against theUS dollar during the opening hours of the trading session on Thursday.
