On Thursday, Pakistan’s central bank raised its key policy rate by 125 basis points to 15% in order to control high inflation and narrow down the current account deficit.
Inflation is expected to continue rising over the next three to four months, having reached a 13-year high of 21.3% in June 2022.
It is estimated that inflation will peak at around 23% in a few months, following an increase in petroleum products and power prices under IMF conditions.
The current account deficit (CAD) is forecasted to increase dramatically to $16-17 billion for the fiscal year ending June 30, 2022.
This is a significant increase compared to the $1.85 billion deficit seen in the previous fiscal year. The main reason for this surge is the inflationary pressure caused by rising global commodity prices.
Earlier, the central bank had cumulatively revised the key policy rate by 675 basis points from September 2021 to May 2022 to an 11-year high of 13.75%.
