SBP expected to increase interest rates again on IMF insistence

The State Bank of Pakistan (SBP) is reportedly considering increasing the interest rate by 2 per cent during the upcoming Monetary Policy Committee (MPC) meeting in a bid to unlock the International Monetary Fund (IMF) programme.

This follows failed negotiations between the Shehbaz Sharif-led government and the IMF, with the latter demanding that Pakistan raise the interest rate by 4 per cent due to its belief that inflation is lower in Pakistan as per the interest rate.

The SBP had already increased the interest rate by 2 per cent, but now the IMF is reportedly pressuring Islamabad to raise it again by 2 per cent. The MPC is scheduled to meet on April 4 to review the interest rate as per the IMF’s demand.

According to The News, the SBP has reportedly agreed to raise the interest rate by 2 per cent in accordance with the Fund’s demands. On March 2, the SBP raised the monetary policy rate by 300 basis points to 20 per cent due to a deterioration in inflation outlook and expectations amid recent external and fiscal adjustments.