To curtail “Dollarisation” and inflationary pressure SBP hikes interest rate

ISLAMABAD: The State Bank of Pakistan on Tuesday has announced its monetary policy, raising the interest rate by 100 basis pointst– to 13.5 percent.


The move follows the agreement with the International Monetary Fund over a $6 billion loan package that comes with tough conditions aimed at cutting Pakistan’s substantial fiscal and current account deficits and bolstering its shrinking currency reserves.

In line with market expectations, the State Bank of Pakistan (SBP) raised the key interest rate by 100 basis points to 13.25%, on likely pickup in inflation in the near future.

The announcement was made by SBP Governor Reza Baqir at a press conference on Tuesday.

He said that the inflation forecast has been revised up to 11-12% for the current fiscal year 2019-20, however, it is expected to improve in fiscal year 2020-21.

The governor said that the central bank would consider revising down the interest rate if demand softened more, and inflation eased.

“The rate hike will benefit people who have parked savings in saving accounts at banks and/or in national saving schemes,” he said.

The central bank has increased the key interest rate by 7.5% since May 2018 to 13.25%.


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