Pakistan’s central bank made loans more expensive to curb inflation, interest rate increased to 21%

Pakistan Hikes Rates: Interest rates have been increased tremendously in Pakistan. Pakistan’s Central Bank State Bank of Pakistan has increased the interest rates by one percent i.e. 100 basis points to curb the backbreaking inflation. Now the interest rate there has increased to 21 percent.

The inflation rate in Pakistan is close to 35 percent. In March 2023, the inflation rate had reached its highest rates. In order to crack down on the inflation of food items and to win the trust of foreign borrowers, the State Bank of Pakistan has announced a direct increase in interest rates by one per cent. However, an increase of 2 per cent was predicted. The Central Bank has increased interest rates less than expected.

There has been a jump of 45 percent in food, beverage and transportation prices in Pakistan. This inflation has spoiled the budget of every household. In Pakistan, 16 people have died due to the stampede for the distribution of food items. Inflation has not only increased due to local reasons, but global reasons have added fuel to the fire. There has been a huge increase in energy and petroleum tariffs, and due to Ramzan, the demand for food and drink has increased, due to which inflation has also increased. On top of that, Pakistan’s weakening currency against the dollar has added to the difficulties.

State Bank Pakistan said in its statement that the Monetary Policy Committee believes that the current monetary policy policy is absolutely correct. Due to the strict decision taken by the monetary policy today and in the past, it will help in reducing inflation in the next 8 quarters. After January 2022, State Bank of Pakistan has increased the interest rates by 10.25 percent. Pakistan currency has closed at Rs 287.29 against one dollar, which is the lowest level. Today Pakistani currency has become weak by one percent. In 2023, the value of Pakistani currency has declined by 20 percent.

The government of Pakistan is constantly in talks with the IMF to bailout the economy. In 2019, a $6.5 billion bailout agreement was agreed upon with the IMF. Out of which he has to get the next phase loan of $1.1 billion. To get the loan, Pakistan has to take many tough decisions, including strict monetary policy. In the beginning of March, the Central Bank had made the loan costlier by 2 per cent. By June 30, Pakistan also has to repay a debt of $ 4.5 billion.

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