IMF’s Another strict condition: Govt to take a harsh decision of interest rate hike upto 20%
Financial Institution called for strict monetary policy and this is likely to lead to a rise in key interest rates
IMF’s Memorandum of Economic and Fiscal Policy “MEFP” has become a bottleneck for Pakistan, and there is also a possibility that State Bank of Pakistan will increase in key interest rate.
Under the government of Pakistan Democratic Movement (PDM) Muslim League (N) and its allies, the economic challenges are not stopping and now a new storm of inflation is about to hit Pakistan because of the banking sector of Pakistan. Therefore, the base interest rate is likely to increase.
The IMF has called for monetary policy tightening and this is likely to lead to a rise in key interest rates.
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On February 22, State Bank sold T-bills worth Rs 258 per dollar and these T-bills were sold by State Bank at 2.9 percent higher than the base interest rate of 17 percent.
SBP cut-off yields on 3-month short-term T-bills stood at 19.95 percent, giving clear signals to the banking sector.
There is also a possibility that the SBP may have to convene an early monetary policy board meeting and review interest rates early.
Economists and some analysts say that if the State Bank tightens the monetary policy in Pakistan, the base interest rate will have to increase. If monetary policy is tightened due to inflation, the interest rate is likely to increase by 150 to 200 basis points.
Formal negotiations between Pakistan and the IMF for the current loan program concluded on February 9 and Finance Minister Ishaq Dar announced on the morning of February 10 that a staff-level agreement with the IMF would be reached in 3-4 days.
