KARACHI – Pakistan witnessed the highest inflation in the world in the fiscal year 2020, forcing policymakers to increase the interest rate, the State Bank of Pakistan (SBP) said on Sunday.
According to the Inflation Monitor for April issued by the SBP, Pakistan witnessed the highest inflation not only in comparison with the developed economies but also with emerging economies, the Dawn News reported.
The SBP pushed up interest rates to cool down the inflationary pressure during the fiscal year but high rates proved counterproductive as they further increased inflation while the private sector stopped borrowing costly money hampering industrial growth and services.
January witnessed 12-year high inflation at 14.6 per cent. In response to the rising prices, the SBP rose the interest rates to 13.25 per cent.
However, due to the coronavirus pandemic, the entire economic scenario was turned upside down as demand contraction lowered inflation, forcing the SBP to cut down interest rates to 5.25 per cent within just three months, the daily reported.
The rate cut announcement came as inflation slowed down, falling to 8.2 per cent in May, much lower than the SBP projections for the month.
