In a bid to tackle the issue of soaring consumer prices, Pakistan's central bank has raised its key interest rate by 100 basis points to a historic high of 21%. This move comes as the country is grappling with a record-high consumer price inflation of over 35% in March, compounded by a global rise in consumer prices. Furthermore, the Pakistani rupee has hit a new low against the US dollar, currently standing at 287.29.
Pakistan is currently engaged in talks with the International Monetary Fund (IMF) to obtain the next tranche of a $6.5 billion bailout agreement, which was initially reached in 2019. The State Bank of Pakistan has stressed the importance of concluding the ninth review of the IMF program, as it is critical to rebuilding the country's foreign exchange reserve buffers. The previous rate hike of 300 basis points in early March was implemented to fulfil a key requirement of the IMF, which was necessary for the release of the pending bailout funds.
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