SBP likely to increase interest rate in order to unlock IMF loan

ISLAMABAD: In order to restart the stalled IMF loan program, the State Bank of Pakistan (SBP) is expected to hike interest rates by 2% at the next meeting of the Monetary Policy Committee (MPC).

The IMF and Pakistan were supposed to reach a staff-level agreement on February 9.

The Shehbaz Sharif-led administration is making desperate attempts to secure much-needed funding, but the IMF does not appear to be pleased with the actions made thus far.

According to the sources, Pakistan was required by the IMF to raise interest rates by 4%. According to the fund, Pakistan’s interest rate results in reduced inflation.

Islamabad is being “forced” by the IMF to hike interest rates once more by 2 percentage points after the SBP recently increased them by 2 percentage points.

The SBP’s MPC will meet on April 4 to discuss the interest rate and the IMF’s request, according to information that has come to light. The sources added that the SBP will raise the interest rate by 2% in accordance with the IMF’s agreement.

The State Bank of Pakistan (SBP) increased the monetary policy rate to 20% on March 2 by 300 basis points.

“In light of recent external and budgetary changes, this decision reflects a worsening in the inflation outlook and expectations. In order to keep inflation expectations in line with the medium-term target of 5-7 percent, the MPC believes that this outlook requires a robust policy response.