IMF wants govt to recover Rs65b from power consumers

In a worrisome prediction, an analyst associated with JP Morgan has warned that the State Bank of Pakistan could hike interest rate by another 400 basis points.

In an article, it was noted that the State Bank of Pakistan (SBP) raised the policy rate by 100bps to 16 percent in November citing strong and persistent inflationary pressures.

The move, the article mentioned, against the expectations of JP Morgan and a consensus belief. It is an abrupt change from the dovish tone adopted since August when the central bank signaled a greater emphasis on supporting growth in the aftermath of the floods.

Moreover, the writer said to some extent, the rate hike could reflect implicit pressure from the IMF to stay on top of inflation ahead of the delayed 9th EFF review as well as a pre-emptive move to guard against currency pressures ahead of high-profile external debt servicing even as reserves continue to fall.

“In our view, if policy orthodoxy against inflation returns and stays, the SBP remains behind the curve based on their historical reaction function. We now pencil in another 400bps of hikes, bringing the policy rate to 20 percent by end-FY23.”

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