ISLAMABAD: Pakistan will repay a $1 billion international bond on December 2, three days before its due date, the governor of Pakistan central bank said on Friday.
Given that Pakistan is recuperating from terrible floods that claimed more than 1,700 lives and is currently experiencing an economic crisis, there has been growing concern about its capacity to meet its obligations for external financing.
The bond repayment, which matures on December 5, totals $1.08 billion, State Bank of Pakistan (SBP) Governor Jameel Ahmad told a briefing.
Ahmad made his comments as the central bank’s foreign exchange holdings fell to $7.83 billion as of November 18, 2022, per the most recent figures.
Moreover, the State Bank of Pakistan on Friday increased the interest rate by 100 basis points (bps) to 16 percent, taking it to 16%, the highest since 1999.
The development comes against expectations as a majority of market participants expected the central bank to maintain status quo at 15%.
“At today’s meeting, the Monetary Policy Committee (MPC) decided to raise the policy rate by 100 basis points to 16 percent,” the MPC said.
The central bank said that the decision was aimed at ensuring that “elevated inflation does not become entrenched and that risks to financial stability are contained, thus paving the way for higher growth on a more sustainable basis”.
It is impossible to ignore the rise in cost-push inflation, which calls for a monetary policy response: MPC for SBP
The MPC believed that despite the ongoing economic slowdown, supply shocks both domestically and globally were increasingly responsible for driving up prices and driving up inflation.
“In turn, these shocks are spilling over into broader prices and wages, which could de-anchor inflation expectations and undermine medium-term growth. As a result, the rise in cost-push inflation cannot be overlooked and necessitates a monetary policy response.” The press release said.
