Pakistan Raises Benchmark Interest Rate by 1.25 Percentage Points to Curb Inflation

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Pakistan, suffering from economic hardship and high inflation, has raised its benchmark interest rate by 1.25 percentage points to curb inflation.

The State Bank of Pakistan announced on the 7th (local time) that it decided to raise the benchmark interest rate from 13.75% to 15.0%, an increase of 1.25 percentage points.

On the same day, Murtaza Syed, Governor of the State Bank, said, "Controlling inflation is our primary goal," and added, "We expect price increases to continue for about a year."

Previously, the central bank raised interest rates by 2.5 percentage points in April and 1.5 percentage points in May, and with this additional 1.25 percentage point hike, the rate has increased by 5.25 percentage points in three months.

Pakistan is facing severe inflation, with prices rising 21.3% in June, the highest in 14 years.

Pakistan's economy is deteriorating due to large external debt from massive infrastructure investments combined with the impact of the COVID-19 pandemic.

The new government led by Prime Minister Shehbaz Sharif, which took office in April, is making every effort to overcome the economic crisis, including negotiations to resume bailout support with the International Monetary Fund (IMF).

Pakistan agreed with the IMF in 2019 to receive a three-year bailout package worth $6 billion (approximately 7.8 trillion KRW), but has only received $3 billion (approximately 3.9 trillion KRW) so far.