Skip to main content

Pakistan’s cent­ral bank has raised lend­ing rates to 20%.

 

Flag of Pakistan.
Pakistan’s cent­ral bank has raised lend­ing rates by 300 basis points to 20 per cent, the highest of any coun­try in Asia, as it struggles to con­tain rising prices and a deep­en­ing fin­an­cial crisis. The interest rate rise is one of the sev­eral meas­ures Pakistan hopes will free up a stalled tranche of about $1bn held back by the IMF under its $6.5bn fin­an­cing agree­ment with the coun­try, which ends in June this year. Pakistan’s cent­ral bank said, «anchor­ing infla­tion expect­a­tions is crit­ical and war­rants a strong policy response». On Wed­nes­day, the Pakistan Bur­eau of Stat­ist­ics repor­ted that infla­tion climbed to 31.5 per cent in Feb­ru­ary, up from 27.6 per cent a month earlier.

The coun­try has been hit hard by rising food and fuel prices and cata­strophic floods last year, a crisis com­poun­ded by polit­ical ten­sions that have weakened the gov­ern­ment of Prime Min­is­ter Shehbaz Sharif. The gov­ern­ment has intro­duced aus­ter­ity meas­ures and raised a VAT-style sales tax. In addition, Pakistan’s fail­ure to secure IMF fund­ing has caused the gov­ern­ment’s for­eign exchange reserves to sink to the equi­val­ent of less than the cost of a month’s imports. Rat­ing agency Moody’s this week cut Pakistan’s sov­er­eign credit rat­ing by two notches to «Caa3», say­ing the coun­try’s «increas­ingly fra­gile liquid­ity and external pos­i­tion» had sig­ni­fic­antly raised the risk of default.

Moody’s warned that «weak gov­ern­ment and heightened social risks impede Pakistan’s abil­ity to con­tinu­ally imple­ment the range of policies that would secure large amounts of fin­an­cing». «Pakistan’s eco­nomy is head­ing towards a very dan­ger­ous future. The new interest rate will make it impossible for many busi­nesses to afford bor­row­ings and still make money,» said Iht­isham ul Haque, a com­ment­ator on the Pakistan eco­nomy.

www.sba.tax

Labels:

Comments

  1. Dom3 March 2023 at 14:36

    The poor people of Pakistan are in for a horrible period. I don't see things getting better any time soon. Quite the opposite. With this new measure the government has almost made sure that many businesses will just go bankrupt.

    ReplyDelete
    Replies
    1. Charlie3 March 2023 at 14:49

      If they don’t get outside help there’s no way they are getting through this. I don’t even want to imagine what will happen to all those people that won’t have enough to eat…

      Delete

Post a Comment

Cloud Bookkeeping

HS2 cost cuts new routes and add delays.

 Trans­port depart­ment offi­cials have begun work on «Project Sil­ver­light» sug­gest­ing the high­speed rail scheme might face four addi­tional years of delay. The planned High Speed 2 rail line faces fur­ther delays of up to four years and more cuts to the project under plans being drawn up by min­is­ters to rein in its bal­loon­ing costs. The extra delays to the coun­try’s biggest infra­struc­ture project would mean that it would not be com­pleted until as late as 2045 — 12 years after ori­gin­ally planned. «This is a func­tion of infla­tion; we are hav­ing to find huge sav­ings because the cost of everything the depart­ment is already doing will have become so much more expens­ive by then,» said one gov­ern­ment offi­cial. In Octo­ber, the FT repor­ted that the Treas­ury had asked HS2’s man­age­ment team to identify poten­tial cuts or «scope reduc­tions» to the high-speed line. Trans­port depart­ment offi­cials have sub­sequently begun work on Project Sil­ver­light aimed at fi...
4 comments
Read more

Small business will be excluded from fraud law.

  Min­is­ters are plan­ning to exclude small busi­nesses from anti-fraud legis­la­tion by nar­row­ing the scope of a crim­inal offence tar­get­ing com­pan­ies that fail to pre­vent eco­nomic crimes. MPs and anti-cor­rup­tion cam­paign­ers had hoped the gov­ern­ment would seek to amend the eco­nomic crime and cor­por­ate trans­par­ency bill to ensure the new offence covered all com­pan­ies. The plans to limit the scope of the amend­ments will also dis­ap­point those who had hoped the legis­la­tion would remove key hurdles to the pro­sec­u­tion of white-col­lar crime. A new «fail­ure to pre­vent» offence for fraud would bring it in line with exist­ing sim­ilar cor­por­ate offences for bribery and tax eva­sion. At present, pro­sec­utors need only prove that organ­isa­tions lacked «reas­on­able» or «adequate» con­trols to pur­sue the offence in bribery and tax eva­sion cases. «It would be much more sens­ible for the gov­ern­ment to provide strong guid­ance for SMEs on what these pro­ce...
3 comments
Read more

Doubt on CS's collateral.

  Credit Suisse provided an emergency $140mn loan to Greensill Capital based partly on invoices to companies that deny ever doing the business stated on the documents. The Swiss bank provided the loan in October 2020, less than five months before the collapse of Greensill, a supply chain finance firm that counted former British prime minister David Cameron as a senior adviser. Invoices issued by metals magnate Sanjeev Gupta’s Liberty Commodities and sold to Greensill formed part of the collateral for the loan, according to documents seen by the Financial Times and people familiar with the transaction. Yet several of the parties named on the invoices have told the FT they did no business with Liberty. GFG has consistently denied any wrongdoing. Credit Suisse’s loan had a clause dictating that the collateral value had to be equal to or greater than the $140mn borrowed. The terms of the debt agreement only allowed invoices on Green-sill’s balance sheet to count towards this tally if t...
2 comments
Read more