Pakistan’s Central Bank Likely to Hike Interest Rate on IMF Demand

• State Bank of Pakistan Plans 2% Interest Rate Hike to Unlock IMF Program.
• Pakistani Government Seeks Funds from IMF to Stabilize Economy.
• Pakistan Fails to Meet IMF Requirements, Delaying Staff-Level Agreement.

According to The News, the State Bank of Pakistan (SBP) is expected to increase the interest rate by 2% during the next meeting of the Monetary Policy Committee (MPC) to unlock the International Monetary Fund (IMF) program. 

The government has been attempting to secure funds from the IMF, but the global lender has yet to be convinced by the steps taken thus far. The staff-level agreement between the IMF and Pakistan was initially set for February 9 but has been delayed due to the government’s failure to satisfy the lender.

According to sources, to further unlock the IMF program, the State Bank of Pakistan (SBP) is expected to raise the interest rate by 2% during its upcoming meeting of the Monetary Policy Committee (MPC).

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The International Monetary Fund (IMF) had demanded a 4% increase in the interest rate, but the SBP raised it by 2% earlier.

The MPC is scheduled to meet on April 4 to review the interest rate. It is expected that the SBP will increase the interest rate by 2%, as agreed with the Fund. On March 2, the SBP raised the monetary policy rate by 300 basis points to 20% to anchor inflation expectations around the medium-term target of 5%-7%.