Business | Markets
Rate hike barely helps Pakistan
The Pakistani rupee ended little changed yesterday despite a sharp increase in the key discount rate the previous day.
- Reuters
- Published: 23:54 November 13, 2008
Karachi: The Pakistani rupee ended little changed yesterday despite a sharp increase in the key discount rate the previous day.
State Bank of Pakistan on Wednesday hiked its discount rate 200 basis points to 15 per cent to curb inflation, currently running over 25 per cent, reduce the current account and fiscal deficits, and build foreign currency reserves.
"The rise in the discount rate is a positive step with regards to the forex market," said a currency dealer, but there was little reaction.
No other choice
The rupee ended at 80.29/39 to the dollar, compared with Wed-nesday's closing of 80.35/45. Zainab Jabbar, economist at IGI Securities said in a note that with the central bank foreign reserves declining to $3.5 billion and a negative real rate of return, "the SBP had no choice but to raise base rates to current levels."
Some analysts suspect the central bank was under pressure from the International Monetary Fund to raise rates, as the government is expected to ask the multi-lateral lender for an emergency loan to avert a balance of payments crisis.
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