Pakistan's central bank hikes interest rate to 12.25 per cent

KARACHI - The State Bank of Pakistan announced the monetary policy on Monday, increasing the interest rate to 12.25 per cent.

The interest rate was raised by 150 basis points as it previously stood at 10.75 per cent; the interest rate has been announced for two months.

In its press release, the central bank highlighted that the current account deficit narrowed to US$ 9.6 billion in Jul-Mar FY19 as compared to a deficit of US$ 13.6 billion during the same period last year, a fall of 29 percent.

The overall fiscal deficit is likely to be considerably higher during Jul-Mar FY19 as compared to the same period last year due to a shortfall in revenue collection, higher than budgeted interest payments and security-related expenditures, it stated.

In SBP’s view, the recent movement in the exchange rate reflects the continuing resolution of accumulated 'imbalances of the past and some role of supply and demand factors'.

" The program is designed to restore macroeconomic stability and support sustainable
economic growth, and is expected to unlock considerable additional external financing," SBP stated about the IMF program.

The new monetary policy comes days after Pakistan and International Monetary Fund (IMF) agreed on a bailout package against which Islamabad would be provided $6b in three years.