The State Bank of Pakistan (SBP) increased the benchmark interest rate by 100 basis points to 17% on Monday.
State Bank of Pakistan (SBP) Governor Jameel Ahmad announced Monday that the Monetary Policy Committee (MPC) has decided to raise interest rates by 1% to 17%.
He announced this at a press conference after the MPC meeting. The committee stated at the meeting that inflationary pressure continues. “It says that price stability is necessary to control inflation and maintain growth rates,” Ahmed said. “Our near-term challenges, including the current account deficit, have persisted. Our expected inflows have been delayed as our reserves are under pressure.”
Third, the committee took into account global economic conditions, including the downgrade of global growth by the International Monetary Fund and the World Bank, as well as widespread uncertainty. “It directly or indirectly affects our markets. For example, our exports and remittances are affected.”
The SBP chief said the monetary policy committee decided to raise the policy rate after a detailed analysis of the country’s external and fiscal position. Ahmed said there were risks, especially external issues, to the 2 percent GDP growth forecast given at the monetary policy committee’s last meeting in November.
“On the external front, we expect a current account deficit of $10 billion this year. Our actual performance in the first six months was better than expected.
Despite declining exports and remittances, our current account deficit remained at $3.7 billion in July-December. “That means we’ve met the target. We now project that we could reduce the current account deficit below $9 billion.” He called it a good development that would reduce the country’s external financing needs. The central bank’s monetary policy committee also conducted a detailed analysis of the agricultural sector and inflation, the SBP chief said. “The committee believes that a 1 percentage point increase [in interest rates] is necessary to stabilize inflation.”
P.s.: This is a developing story and will be updated with more details.
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