Pakistan raises rates by 300bp as default risks rise

Authorities struggle to collect taxes and unlock IMF funds

The State Bank of Pakistan
Photo: SBP/Abbas Ali Khan

The State Bank of Pakistan hiked its policy rate by 300 basis points on March 2, to 20%. This was the largest of nine increases since September 2021, totalling 1,300bp.

The SBP’s monetary policy committee moved as the country continues to grapple with spiralling inflation, a wilting currency and a real risk of default. Pakistan has struggled to meet IMF conditions to unlock funding from a 2019 loan package.

Year-on-year headline inflation rose to 31.5% in February, from 27.6% in January. The

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