Pakistan Raises Key Rate After IMF Bailout Negotiations Stall

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Pakistan’s central bank raised its key rate as the nation continues to negotiate an International Monetary Fund bailout.
The target policy rate was raised for the fourth straight meeting to 10 percent from 8.5 percent, the State Bank of Pakistan said in a statement on Friday. An increase was predicted by all 31 economist, but most expected a less aggressive move, according to a Bloomberg survey. Pakistan has raised rates by 4 percentage points this year, making it the most aggressive hiker in Asia.
“Near term challenges to Pakistan’s economy continue to persist with rising inflation, an elevated fiscal deficit and low foreign exchange reserves,” the central bank said.
The South Asian nation is in talks with the IMF to fill a financing gap of more than $12 billion as its external deficits continue to widen. Prime Minister Imran Khan’s government has failed to reach an agreement with the fund this month after talks stalled amid disagreements over tax and currency policies.
The rate increase came as the rupee was devalued on Friday to 139 a dollar, the fifth time this year. The central bank has also raised its inflation forecast to 7.5 percent for fiscal year through June 2019.