State Bank of Pakistan increases benchmark interest rate to 13.25 per cent

The State Bank of Pakistan (SBP) Tuesday increased the key interest rate by 100 basis points to 13.5 per cent to combat raging inflationary trends in the country.

The decision was announced by SBP Governor Reza Baqir, who was appointed on the key post in May ahead of the crucial talks with the International Monetary Fund for a bailout package.

Baqir said the decision was taken due to inflation and to control the impact of recent increases of utility prices.

"The inflation forecast has been revised up to 11-12 per cent for the fiscal year 2019-20 and is expected to improve in the next fiscal," he said.

The SBP has steadily increased the key interest rate by 7.5 per cent since May 2018 to 13.25 per cent. The bank announced a target rate every two months and the measure is part of efforts on the part of the bank to ensure price stability.

The IMF earlier this month formally approved USD 6 billion package for cash-strapped Pakistan and it is believed that the hike in interest rate might be part of commitment with the global lender.