SBP prepones meeting to Thursday to hike key policy rate

The State Bank of Pakistan (SBP) on Tuesday preponed its meeting to Thursday regarding the matter of hiking up its key policy rate by 100-200 basis points on the recommendation of the International Monetary Fund (IMF).

The policy rate currently stands at a 24-year high of 17%.

The central bank, through its Twitter handle, said that "the forthcoming meeting of the Monetary Policy Committee has been preponed and now it will be held on Thursday, March 02, 2023."

As per its original calendar, the SBP monetary policy committee meeting was earlier scheduled for March 16, 2023.

The bank revised the schedule for the meeting to fulfil another condition of the IMF to hike key policy rates by 200-300 basis points to win back the $6.5 billion loan programme.

Financial experts, however, anticipate a maximum rise of 200 basis points in the policy rate in the preponed meeting considering a jump of equal 200 basis points in the interest rate on financing by commercial banks to the cash-strapped government last week.

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Last week, commercial banks charged a 26-year high-interest rate of 20% on the new financing of Rs258 billion for up to one year to the government.

Commercial banks jacked up the interest rate on speculation that the SBP would hike the policy rate on any day to achieve a staff-level agreement with the IMF.

Prime Minister Shehbaz Sharif, however, clarified last week that it may take another week to 10 days to strike the staff-level agreement after which the IMF executive board would approve the release of the next loan tranche of $1.1 billion.

The government has taken several tough decisions to revive the IMF programme to avert a likely default on foreign debt repayments.

The decisions included an increase in energy prices as well as an increase in taxes through the mini-budget.

Pakistan’s foreign exchange reserves still stand low at around $4 billion despite China lending $700 million last Friday.