The central bank of Pakistan raised its key interest rate by 300bps to 20% on March 2nd 2023, pushing borrowing costs to their highest level since 1996. Policymakers noted that the recent fiscal adjustments and currency depreciation have led to a significant deterioration in the near term inflation outlook and a further upward drift in inflation expectations.
The inflation is expected to rise further in the next few months to the range of 27%-29%, compared to 21%-23% seen in November 2022. Pakistan is undertaking several measures including an increase in GST and excise duties, reduction in subsidies, adjustments in energy prices and artificial curbs on the exchange rate in an attempt to secure a $1 billion loan from the International Monetary Fund. source: State Bank of Pakistan
Graphics: Rafay Shaikh
