Karachi [Pakistan], November 27 (ANI): The interest rate in Pakistan skyrocketed to its highest in 24 years after the State Bank of Pakistan (SBP) raised its key policy rate by 16 per cent on Friday to curb inflation, according to Dawn.
The central bank said in a statement following a meeting of the committee that the decision was based on the MPC's assessment that "inflationary pressures have proven to be higher and more persistent than envisaged."
With this change, the SBP interest rate increases for this year total of 625 basis points, however, the rate was unchanged at its recent sessions in October and September, according to Dawn.
The decision came as the South-Asian country is currently cash-strapped and under a severe economic and political crisis and it is the need of the hour to curb the financial losses.
The SBP said that inflation is increasingly being driven by enduring domestic and international supply shocks that are pushing up prices in the midst of the protracted economic slump. These shocks are then having an impact on wider prices and wages, which might damage medium-term growth and weaken inflation expectations, reported the Express Tribune.
Despite severe floods and efforts to maintain budgetary restraint, the nation has been struggling with continuous high inflation, with the consumer price index (CPI) recording a 26.6 per cent year-over-year increase in October.
Devastating floods that peaked in August killed over 1,700 people and caused billions of dollars in damage to infrastructure as well as agricultural land.
According to the Express Tribune, Pakistan received about USD 30 billion in remittances in the fiscal year 2022, even then it did not manage to keep its current account deficit in control, as it still needs around USD 32 billion this fiscal year to make payments against foreign obligations.
Not just the foreign obligations, but also the rising inflation is making the cost of living quite difficult for the local people. (ANI)