KARACHI, July 7(ABC): In line with the market expectation, the State Bank of Pakistan (SBP) on Thursday aggressively raised the benchmark interest rate by a massive 125 basis points to 15% — the highest since November 2008.
The rate hike came as the coalition government is trying hard to revive the much-awaited International Monetary Fund (IMF) for the resumption of a $6-billion loan programme that had been stalled since early April.
The central bank has cumulatively increased the rate by 800 basis points since September 2021 to control inflation and narrow the current account deficit.
During today’s meeting, under the chair of Acting Governor Dr Murtaza Syed, it was decided that the interest rates on export finance scheme (EFS) and long-term financing facility (LTFF) loans are now being linked to the policy rate to strengthen monetary policy transmission while continuing to incentivise exports by presently offering a discount of 500 basis points relative to the policy rate.
According to a statement issued by the central bank, this combined action continues the monetary tightening underway since last September, “which is aimed at ensuring a soft landing of the economy amid an exceptionally challenging and uncertain global environment.”