ISLAMABAD - The government might further increase the interest rate by two percent to fulfil the conditions of the International Monetary Fund (IMF) to revive the much needed loan programme.
The State Bank of Pakistan’s Monetary Policy Committee will meet on April 4 to review the interest rate on IMF’s demand. Earlier, the IMF had demanded Pakistan to jack up the interest rate by 4 percent to control the inflation rate. However, the SBP had raised the interest rate by 2 percent. Inflation has skyrocketed to 31.5 percent in February this year mainly due to the currency depreciation and recent rise in energy prices.
Pakistan and IMF have yet to reach the staff level agreement as both sides are continuously negotiating since January 31 this year. The government had met all prior actions of the IMF. The government has taken all tough decisions including increasing power and gas prices massively and imposing new taxation measures worth of Rs170 billion. In last two days, Pakistan has accepted two more conditions. The government on the IMF demand has imposed a surcharge of up to Rs3.23 per unit on electricity consumers across the country from July 1. Meanwhile, the State Bank of Pakistan (SBP) has raised the benchmark interest rate by a significant 300 basis points (bps) to 20 percent.
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