Pakistan accepts another IMF demand to increase interest rate
The policy rate would be jacked up by 200 basis point to take it to 19pc
ISLAMABAD (Web Desk) – Pakistan has agreed to raise the interest rate in an off-cycle review by two per cent, as the cash-strapped country faces pressure to mend its finances to secure $1 billion from the International Monetary Fund.
The Ministry of Finance authorities, according to reports, said the agreement was reached in Friday night’s virtual talks with the officials of the global lender.
They said the South Asian country would reach the staff-level agreement with the IMF after resolution of issues in the power sector. The policy rate would be jacked up by 200 basis point to take it to 19pc as it is currently stands at 17pc -- the highest level in 25 years.
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The cash-strapped country is undertaking key measures to secure IMF funding, including raising taxes, removing blanket subsidies, and artificial curbs on the exchange rate. While the government expects a deal with IMF soon, media reports say that the agency expects the policy rate to be increased.
The next meeting of the central bank’s Monetary Policy Committee is scheduled for March 16. Off-cycle rate reviews are not uncommon though.