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.
1/3 The Monetary Policy Committee decided to raise the policy rate by 300 basis points to 20 percent in its meeting today. https://t.co/8ceKtaFu3j pic.twitter.com/OZA85p0Ewx
— SBP (@StateBank_Pak) March 2, 2023
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.