The State Bank of Pakistan has increased the interest rate by 250 basis points to 12.25 per cent, reported the local media on Thursday.
The SBP's Monetary Policy Committee (MPC) said in a statement that in its last meeting on March 8, it had noted the "significant uncertainty around the outlook for international commodity prices and global financial conditions" which were further exacerbated by the Russia-Ukraine conflict, reported Dawn.
"Since the last MPC meeting, the outlook for inflation has deteriorated and risks to external stability have risen," it noted.
"Externally, futures markets suggest that global commodity prices, including oil, are likely to remain elevated for longer and the Federal Reserve is likely to increase interest rates more quickly than previously anticipated, likely leading to a sharper tightening of global financial conditions," the statement said, as per the newspaper.
Moreover, The Asian Development Bank (ADB) on Wednesday forecasted Pakistan's economic growth rate to slow down to 4 per cent this year from 5.6 pc in the Fiscal Year 2021.
The decline in the growth rate is owing to tighter fiscal and monetary policies and the Russia-Ukraine war. According to the Asian Development Outlook (ADO) 2022, ADB's annual flagship publication, the Manila-based lending agency said Pakistan's revenue collection was still lower when compared with peers and needed a strong reform effort to achieve its tax-to-GDP potential of 22-25pc, reported Dawn.
Moreover, the ADB also projected growth in South Asia to slow to 7pc in 2022 (from 8.3pc in 2021), before picking up to 7.4pc in 2023.
"Pakistan's growth is forecast moderating to 4pc in 2022 on weaker domestic demand from monetary tightening and fiscal consolidation before picking up to 4.5 in 2023", the ADB said.
The ADB expected inflation to pick up in FY22, averaging 11pc, reflecting higher international energy prices, significant currency depreciation, and elevated global food prices from supply disruptions reported the newspaper.
Pakistan is a net importer of oil and natural gas, with both comprising almost 20pc of total imports, the country will continue experiencing strong inflationary pressure for the rest of the current fiscal year from the jump in global fuel prices related to the Russian invasion of Ukraine.
( With inputs from ANI )
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