The State Bank of Pakistan (SBP) has raised the benchmark interest rate by 125 basis points to 15 per cent — the highest in over 13 years.
During its meeting today, the central bank decided that the interest rates on export finance scheme (EFS) and long-term financing facility (LTFF) loans are now being linked to the policy rate to strengthen monetary policy transmission while continuing to incentivise exports by presently offering a discount of 500 basis points relative to the policy rate.
The central bank said this combined action continues the monetary tightening underway since last September, “which is aimed at ensuring a soft landing of the economy amid an exceptionally challenging and uncertain global environment.”
"It should help cool economic activity, prevent a de-anchoring of inflation expectations and provide support to the rupee in the wake of multi-year high inflation and record imports,” it added.
The SBP believes that without decisive macroeconomic adjustments, there is a significant risk of substantially worse outcomes that would compromise price stability, financial stability and growth.
It further said that the Monetary Policy Committee will continue to carefully monitor developments affecting medium-term prospects for inflation, financial stability and growth, and take appropriate action to safeguard them.
During its meeting today, the central bank decided that the interest rates on export finance scheme (EFS) and long-term financing facility (LTFF) loans are now being linked to the policy rate to strengthen monetary policy transmission while continuing to incentivise exports by presently offering a discount of 500 basis points relative to the policy rate.
The central bank said this combined action continues the monetary tightening underway since last September, “which is aimed at ensuring a soft landing of the economy amid an exceptionally challenging and uncertain global environment.”
"It should help cool economic activity, prevent a de-anchoring of inflation expectations and provide support to the rupee in the wake of multi-year high inflation and record imports,” it added.
The SBP believes that without decisive macroeconomic adjustments, there is a significant risk of substantially worse outcomes that would compromise price stability, financial stability and growth.
It further said that the Monetary Policy Committee will continue to carefully monitor developments affecting medium-term prospects for inflation, financial stability and growth, and take appropriate action to safeguard them.