Skip to content
Search

Latest Stories

Pakistan central bank raises key interest rate

PAKISTAN'S central bank raised its main policy rate by 100 basis points on Tuesday (16) to 13.25 per cent, citing increased inflationary pressures and a likely near-term rise in prices from higher utility costs.

The increase follows this month's accord with the International Monetary Fund on a $6 billion loan package that comes with tough conditions aimed at cutting Pakistan's substantial fiscal and current account deficits and bolstering its shrinking currency reserves.


State Bank of Pakistan Governor Reza Baqir said the decision to raise rates took into account upside inflationary pressures and the impact from recent increases in utility prices passed under the government's recent budget.

He said the central bank's monetary policy committee (MPC) stood ready to act on unexpected developments that could prompt either further modest tightening or easing in monetary policy. But the latest rise had completed the necessary policy measures to address longstanding imbalances.

"With this decision on interest rates, the MPC is of the view that the adjustment related to interest rates and the exchange rate from previously accumulated imbalances has taken place," the committee said in a statement.

The central bank has now increased its main policy rate nine times since the beginning of last year, raising it by a total of 750 basis points as it has struggled to control inflation, a widening fiscal deficit and pressure on the rupee currency.

Inflation eased slightly last month to 8.9 per cent but Baqir said he expected pressures to continue with inflation averaging 11-12 per cent in the current fiscal year, higher than previously expected, before falling considerably in 2021.

The central bank, which forecast real gross domestic product (GDP) growth of about 3.5 per cent in the year to June 2020, said real interest rates implied by these inflation projections and Tuesday's rate rise were "at appropriate levels considering the cyclical weakening of aggregate demand".

Under the bailout accord, the IMF said it expected "appropriately tight monetary policy" would bring inflation down to 5-7 per cent in the medium term.

With slowing growth, a budget deficit that has climbed to more than seven per cent of GDP and currency reserves of about $8bn following the first tranche of the IMF loan, Pakistan has been struggling to ward off a debt and balance of payments crisis for more than a year.

After initial reluctance, prime minister Imran Khan's government turned to the IMF for support and finalised a $6bn loan agreement this month that will unlock an additional $38bn in loans from other international partners.

The three-year agreement for Pakistan's 13th IMF bailout since the late 1980s, has seen a sharp drop in the value of the rupee that has added to inflationary pressures after the central bank agreed to a "flexible, market-determined exchange rate".

However, the central bank said it stood ready to take action to address any "disorderly market conditions" in the foreign exchange market.

(Reuters)

More For You

Prudential to list Indian asset management venture

Prudential chief executive Anil Wadhwani

Prudential to list Indian asset management venture

INSURER Prudential plc announced that it is considering a partial listing of its stake in ICICI Prudential Asset Management, one of India's leading investment firms. The news sent Prudential's shares soaring by 5.8 per cent to close at 722p on the London Stock Exchange.

The FTSE 100 company currently holds a 49 per cent stake in the Indian joint venture, which market analysts estimate to be worth around £4 billion. ICICI Bank, which owns the remaining 51 per cent, has confirmed its intention to maintain its majority shareholding, emphasising its "long-term commitment" to the partnership that began in 1998, reported the Times.

Keep ReadingShow less
NatWest-Reuters

The bank has set a new performance target, aiming for a return on tangible equity of 15-16 per cent in 2025 and above 15 per cent by 2027. (Photo: Reuters)

What’s driving NatWest’s better-than-expected profit growth?

NATWEST reported higher-than-expected annual profit on Friday, supported by its growth strategy, improved productivity, and capital management efforts.

The bank, which once had assets worth 2.2 trillion pounds—more than twice the size of the British economy—has undergone years of restructuring to focus mainly on domestic consumer and mortgage lending.

Keep ReadingShow less
London business district
A general view shows the London's financial district from an office window in Canary Wharf. (Photo: Getty Images)

Economy grows 0.1 per cent in fourth quarter, defying expectations

THE UK economy expanded by 0.1 per cent in the final quarter of 2024, contrary to forecasts of a contraction, according to official data released on Thursday.

The growth, supported by a stronger-than-expected 0.4 per cent rise in December, offers some relief to chancellor Rachel Reeves as she navigates broader economic challenges.

Keep ReadingShow less
BP-Reuters

Fourth-quarter profit dropped 61 per cent compared to the previous year, marking BP’s weakest results since Q4 2020, when the pandemic reduced global oil demand. (Photo: Reuters)

BP reports lowest quarterly profit in four years, plans strategy reset

BP reported a quarterly profit of £943 million on Tuesday, falling short of expectations and marking its lowest in four years.

The company said it plans a "fundamental reset" of its strategy, days after reports that Elliott Management had taken a stake in the oil major.

Keep ReadingShow less
Shein-Reuters

Shein had aimed to go public in London in the first half of this year, subject to regulatory approvals in the UK and China. (Photo: Reuters)

Shein cuts valuation to £40 billion for London listing

SHEIN is preparing to lower its valuation to around £40 billion for a potential initial public offering (IPO) in London, according to three Reuters sources familiar with the matter.

This is nearly 25 per cent lower than the company's 2023 fundraising valuation as it faces increasing challenges.

Keep ReadingShow less