By Farhan Sharif
Dec. 11 (Bloomberg) -- Pakistan’s inflation eased from near a three-decade high in November after the central bank raised its benchmark interest rate four times this year.
Consumer prices in South Asia’s second-largest economy increased 24.68 percent from a year earlier after gaining 25 percent in October, the Federal Bureau of Statistics said in Islamabad today. Prices fell 0.12 percent from October.
The decline in the inflation rate probably isn’t enough to prevent the State Bank of Pakistan from increasing rates further in its next monetary policy statement in January, economists said. The central bank promised the International Monetary Fund as part of a $7.6 billion bailout that it would raise borrowing costs if foreign reserves drop too low.
“The central bank might want to avoid an interest-rate rise, but it seems they will increase again on the IMF’s suggestion,” said Asif Ali Qureshi, head of research at Invisor Securities Ltd in Karachi. “There are very high chances of a rate increase in January.”
Governor Shamshad Akhtar on Nov. 12 raised the central bank’s key rate by 2 percentage points to 15 percent, describing the move as “the toughest decision of my life.” The bank pledged to the IMF to increase the rate again if foreign reserves fell below $1.165 billion at the end of December.
IMF Bailout
Pakistan was forced to turn to the IMF for a rescue package after its reserves shrunk 75 percent in a year to $3.45 billion. The rupee, which declined as much as 26 percent this year, has strengthened 0.06 percent this week and is heading for its eighth straight weekly gain against the U.S. currency.
The IMF has approved more than $40 billion of loans in recent weeks to prevent the global financial crisis and recession from undermining the stability of developing nations. Ukraine, Serbia and Iceland have already got funds from the IMF. Belarus has requested $2 billion and Turkey may also agree to emergency funding.
Pakistan’s $144 billion economy may miss this year’s growth targets and inflation may remain as high as 22 percent, the central bank said in annual report on Dec. 6. The pace of expansion this fiscal year may slow to between 3.5 percent and 4.5 percent, compared with a target of 5.8 percent, it said.
The economy may expand as little as 3 percent this fiscal year in response to a “tightening” of economic policies and slowing growth among Pakistan’s trading partners, the International Monetary Fund said last month. That would be the slowest pace since 2000, when the economy grew 2 percent.
To contact the reporter on this story: Farhan Sharif in Karachi at fsharif2@bloomberg.net.
Dec. 11 (Bloomberg) -- Pakistan’s inflation eased from near a three-decade high in November after the central bank raised its benchmark interest rate four times this year.
Consumer prices in South Asia’s second-largest economy increased 24.68 percent from a year earlier after gaining 25 percent in October, the Federal Bureau of Statistics said in Islamabad today. Prices fell 0.12 percent from October.
The decline in the inflation rate probably isn’t enough to prevent the State Bank of Pakistan from increasing rates further in its next monetary policy statement in January, economists said. The central bank promised the International Monetary Fund as part of a $7.6 billion bailout that it would raise borrowing costs if foreign reserves drop too low.
“The central bank might want to avoid an interest-rate rise, but it seems they will increase again on the IMF’s suggestion,” said Asif Ali Qureshi, head of research at Invisor Securities Ltd in Karachi. “There are very high chances of a rate increase in January.”
Governor Shamshad Akhtar on Nov. 12 raised the central bank’s key rate by 2 percentage points to 15 percent, describing the move as “the toughest decision of my life.” The bank pledged to the IMF to increase the rate again if foreign reserves fell below $1.165 billion at the end of December.
IMF Bailout
Pakistan was forced to turn to the IMF for a rescue package after its reserves shrunk 75 percent in a year to $3.45 billion. The rupee, which declined as much as 26 percent this year, has strengthened 0.06 percent this week and is heading for its eighth straight weekly gain against the U.S. currency.
The IMF has approved more than $40 billion of loans in recent weeks to prevent the global financial crisis and recession from undermining the stability of developing nations. Ukraine, Serbia and Iceland have already got funds from the IMF. Belarus has requested $2 billion and Turkey may also agree to emergency funding.
Pakistan’s $144 billion economy may miss this year’s growth targets and inflation may remain as high as 22 percent, the central bank said in annual report on Dec. 6. The pace of expansion this fiscal year may slow to between 3.5 percent and 4.5 percent, compared with a target of 5.8 percent, it said.
The economy may expand as little as 3 percent this fiscal year in response to a “tightening” of economic policies and slowing growth among Pakistan’s trading partners, the International Monetary Fund said last month. That would be the slowest pace since 2000, when the economy grew 2 percent.
To contact the reporter on this story: Farhan Sharif in Karachi at fsharif2@bloomberg.net.
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