“Inflation has continued to rise in Egypt, Pakistan and Tunisia, with the comparison of current policy interest rates relative to natural policy rate estimates suggesting that further interest rate increases are needed to stabilise inflation,” reads the report. The IMF defines the natural policy rate as the real natural rate plus one-year-ahead inflation expectations from the World Economic Outlook databases. But the increase in the interest rates has caused a significant surge in the government’s debt servicing cost, which is now estimated at around Rs5.3 trillion as against the budgeted figure of Rs3.95 trillion. Since the start of the IMF programme in July 2019, Pakistan has doubled the policy rate. At the start of the policy talks in January this year, the IMF had demanded increasing the the interest rates by at least 6%.

Source: The Express Tribune May 04, 2023 08:54 UTC