Pakistan’s government has agreed to increase the policy interest rate, which stands at 17 percent, by two percent, or 200 basis points, to meet another condition set by the International Monetary Fund (IMF), The Express Tribune reported.
With the new decision, Pakistan has accepted another pre-condition of the IMF for the release of USD 1.1 billion in critical funding, a part of the USD 6.5 billion bailout package, the report said, adding that Pakistan has announced an increase in interest rates based on rates the government set in the auction to raise domestic debt. The decision by Pakistani authorities will push the interest rate to 19 percent, just below the previous record of 19.5 percent set in October 1996, according to The Express Tribune.
Sources in Pakistan’s Ministry of Finance said that a technical-level discussion had virtually taken place between Islamabad and the IMF review mission.
The sources revealed that there was an expectation that Pakistan would increase the interest rate by two percent, according to The Express Tribune report. According to sources, the discussions between the Pakistan government and IMF officials were in the final stages on some issues in the power sector.
Earlier this month, the Pakistan government and the IMF staff concluded the ninth review of the USD 6.5 billion bailout package without a staff-level agreement. The Pakistani government had hoped that they would be able to convince the IMF about implementing the conditions in a gradual manner. However, Islamabad’s hopes were dashed during the IMF mission’s 10-day visit to Pakistan.
Amid an unprecedented economic crisis in the country, Pakistan Prime Minister Shehbaz Sharif instructed the Ministry of Foreign Affairs to cut the number of foreign missions as part of austerity measures, according to Geo News. Prime Minister Shehbaz Sharif announced the decision on February 22.
“The Prime Minister is pleased to direct that a well-considered proposal or plan in this respect may please be submitted to this office within two weeks,” a directive issued by the PM Office reads.
Shehbaz has issued instructions to the Ministry of Foreign Affairs to slash down a number of foreign missions abroad and reduce their offices, staff, and other measures to cut down expenditures by 15 percent, as per the Geo News report.
As per the news report, the official communication titled “Rationalization of Foreign Mission Abroad” states that in view of the ongoing economic constraints and the consequent need for fiscal consolidation and control of the external deficit, the prime minister was pleased to constitute a National Austerity Committee (NAC).