Brace for the impact! Interest rate hiked to 20pc!

SBP hikes interest rate to fulfil IMF conditions.

Karachi: It seems that the government and authorities have decided to surrender themselves in front of the International Monetary Funds. The Central Bank of Pakistan has hiked the key policy rate to a 26-year high by increasing it by 300 basis points. IMF wanted the government to increase the rate for the revival of the $6.5 billion loan programme.

In its statement, the State Bank of Pakistan said:
“This decision is a reflection of deterioration in the inflation outlook & 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 per cent”.
SBP further said that the importance of reduction in CAD was noted by MPC but to improve the external situation concentrated efforts are required.

IMF has pushed Pakistan to fulfil its demands before the staff-level agreement and for the revival $7 billion Extended Fund Facility (EFF). Sources said that Pakistan and International Monetary Fund (IMF) would conduct virtual talks for staff-level agreement on March 2.

According to media news, IMF is continuously sending new Memorandum of Economic and Financial Policies (MEFP) and tabling new demands before reaching a staff-level agreement.

Earlier IMF forced the government to impose a surcharge of Rs3.82 on electricity rates. Now they wanted SBP to increase the interest rate before the staff-level agreement. IMF insisted that the interest rate in Pakistan should be aligned with inflation.

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