Pakistan Raises Key Rate a Second Meeting to Fight InflationFaseeh Mangi and Khurrum Anis
Pakistan’s central bank raised its benchmark interest rate for the second straight meeting, seeking to fight inflation and keep a struggling economy on track for help under an International Monetary Fund loan program.
The State Bank of Pakistan boosted the discount rate to 10 percent from 9.5 percent, spokesman Umar Siddique said in Karachi today. Twelve of 16 analysts in a Bloomberg News survey predicted the decision, with the rest expecting an increase to 10.5 percent.
Prime Minister Nawaz Sharif’s government has changed energy policies to tackle power shortages and plans to raise as much as $1 billion in a bond issue abroad to bolster depleted foreign-exchange reserves. The IMF approved a $6.6 billion loan for the South Asian nation in September to help stabilize the economy, which has also been set back by a Taliban insurgency.
“Officials needed to raise rates to bring down price pressures and support the currency as they try to rebuild reserves,” Yawar Uz Zaman, senior analyst at Alternate Research Pvt. Ltd. in Karachi, said before the decision.
Pakistan’s rupee has depreciated about 10 percent against the dollar this year, hurt by the nation’s economic woes, and traded at 107.445 per dollar as of 5:56 p.m. local time.
A weaker currency has stoked inflation, with consumer prices climbing more than 9 percent in October from a year earlier, the second-fastest pace in a basket of 17 Asia-Pacific economies tracked by Bloomberg.
The IMF released about $544 million of its loan on Sept. 6 and signaled last week that Pakistan is making progress in overhauling the economy under the program. The lender predicted 2.75 percent economic growth for the fiscal year ending June 30.
The IMF said after sending a mission to Pakistan that it’s “crucial that firm action be taken to begin to rebuild foreign-exchange reserves,” adding officials “reaffirmed their commitment to align monetary and exchange rate policies to this objective, while maintaining price stability.”
Pakistan’s total liquid foreign reserves stood at $9.5 billion on Nov. 1, compared with about $13.8 billion a year earlier, according to central bank data. The nation increased rates in September for the first time in almost three years.