On Thursday, the State Bank fulfilled another IMF condition. When raising the interest rate by three percentage points, from 17% to 20%, the State Bank conceded that inflation would rise further in the coming months before beginning to fall. According to bank insiders, the challenges to the country’s financial stability are under control because financial institutions have adequate capital.
The bank tells the government that due to a lack of foreign exchange reserves, the country must implement emergency energy-saving measures. On the other hand, the worldwide trend is heavily influenced by the desire for the aforementioned increase in the IMF’s interest rate.
After the Central Bank of America’s 5% interest rate rise last year, several European countries were forced to do the same, resulting in the greatest level of inflation in many countries, including the United States, in forty years. At the same time, international economists voiced concern that the consequences of this predicament would fall disproportionately on poor and emerging nations, whose investments would be jeopardized.
Investors will be drawn to invest in US government and business bonds, which will result in higher interest rates. As a result, capital will flow away from impoverished and emerging nations and towards America and other affluent ones.
In light of the recent domestic and international economic crisis, it is more concerning that the Central Bank of America is expected to raise interest rates this year, according to economic analysts. The greatest difficulty confronting Pakistan amid the worst economic crisis in history, including the dollar, is reliance on imports of food, including oil and gas, while economic estimates are proving incorrect as industrial and commercial activities are hampered. In the face of an economic emergency, the government should reassess its initiatives, particularly the national austerity strategy, where there is room for expansion.
