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Pakistan needs to increase policy rate by 50bps to unlock IMF deal

June 30, 2022 (MLN): As Pakistan is getting closer to an International Monetary Fund (IMF) loan, the country would probably have to increase fuel prices along with the policy rate by 50 bps in the next quarter before it receives IMF cash, Bloomberg reported.

Firstly, at a scheduled review on July 1, the two-month-old government would probably have to raise pump prices, according to local media, after already raising them by 60%.

Then, to keep inflation in check, Bloomberg Economics predicts the State Bank of Pakistan will increase its policy rate by 50 basis points next quarter after 675 basis points of hikes since September, taking it to a terminal 14.25%, the report said.

The country is running out of dollars and needs the IMF to either step up with cash or provide comfort to other potential creditors.

Going by the report, it needs at least $41 billion in the next 12 months to repay debt and fund imports, could see its $8.2 billion of foreign-exchange reserves rise by $2.3 billion after a loan from China.

To note, the IMF has shared draft policies that will be assessed by Pakistani officials in order to reach a staff-level agreement in the coming days, Finance Minister Miftah Ismail has said.

He says the IMF could agree to pay out a total $1.9 billion, however, the fund hasn’t responded to a request for comment.

Facing as long as 14 hours power cuts, the masses have been protesting against it as authorities have imposed to conserve fuel. As part of IMF conditions, the government has raised taxes and electricity and fuel prices, which is estimated to stoke the inflation rate to 18.4%, the second-fastest in Asia after Sri Lanka.

Copyright Mettis Link News

Posted on: 2022-06-30T09:35:08+05:00

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