BUSINESS:The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) is likely to raise interest rates.
The SBP announced earlier this week that it had “preponed” the MPC meeting that was scheduled for March 16.
Another attempt to accelerate efforts to secure the eagerly awaited International Monetary Fund (IMF) tranche is the purpose of the meeting.
Abid Qamar, the SBP’s chief spokesperson, had previously stated that there had been no MPC meeting since the meeting last month.
The SBP’s Amendment Act established the MPC, which has the authority to make decisions based on macroeconomic fundamentals.
Arif Habib Limited stated in a commentary that was earlier released that the market expects the SBP to raise benchmark interest rates as the rise in treasury yields in the last auction hinted at market weighing-in concerns on the economic front with investors continuing to take note of rising inflation worldwide and in Pakistan.
In addition, according to sources who spoke with Geo News last week, the coalition government had agreed to raise the interest rate from the current level of 17% to 19% as one of the main conditions imposed by the Fund in order to revive the loan program.
Analysts, on the other hand, thought that the SBP needed to move the MPC meeting up because the ministry of finance can’t afford to lose the next T-bill auction.
A series of discussions had taken place between the Fund and the central bank regarding the possibility of expanding foreign exchange reserves and tightening monetary policy further by the end of June 2023.
In order to change the trajectory of the interest rate from negative to positive, the IMF had also requested that the SBP raise the policy rate by 300 to 400 basis points.
In order to secure funding from the IMF, the cash-strapped nation is taking important steps like raising taxes, eliminating all but one type of subsidy, and imposing artificial exchange rate controls. Media reports state that the lender anticipates an increase in the policy rate, despite the fact that the government anticipates a deal with the IMF soon.
However, off-cycle rate reviews are not unheard of in Pakistan.
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