ISLAMABAD – In another bid to get the stalled loan tranche, the Pakistani government has assured International Monetary Fund to increase its policy rate by two percent.
The cash-strapped country has decided to jack up the interest rate in an off-cycle review, which currently stands at 17 percent as the ruling alliance faces pressure to change its finances for the much-needed funds.
The recent development comes amid ongoing negotiations between the Ministry of Finance and global lender. The differences over fiscal policy were said to be among the top concerns for the government, which is prompting desperate measures from the government.
Sources aware of the ongoing negotiations said the technical level started. Several steps including an increase in policy rate, and additional taxes are said to have a significant impact on the country’s economy which is facing several blows in recent times.
It however could lead to elevated borrowing costs. Despite the speculations, Pakistani officials posed confidence in lenders to find a sustainable solution to the country’s economic woes.
Sharif-led government succumbed to make these extreme changes as the economy remained in hot waters and is dependent on external financing, with foreign exchange reserves held by the country’s central bank plunged to $3 billion.
