The SBP has changed the interest rate to 7.25%
Pakistan has registered economic recovery despite Covid-19 lockdowns. The State Bank of Pakistan, following the meeting of its Monetary Policy Committee, increased the policy rate by 25 basis points to 7.25% on Monday.
Research analyst Raza Jafri says that the State Bank wants to make economic growth sustainable and therefore it has raised interest rates.
Jafri explained that in the past, Pakistan registered growth ony for a few years, and soon lost the momentum because the growth was not sustainable.
A cycle was observed: Current account deficit would reach to unsustainable levels and subsequently foreign exchange reserves would also fall. Different governments had to slam on the brakes after every two to three years of growth.
Bilal Hussain explains the numbers in simple terms.