Pakistan’s economy is expected to see further pressure in the wake of an aggressive hike in the benchmark interest rate by the US Federal Reserve. The capital market is also expected to see mounting pressure because of the rebound in international oil prices.
The Fed has announced a 0.5% interest rate hike, its highest increase in more than 20 years. This development is anticipated to mount pressure on the Pakistani rupee against the US dollar. It may also force the State Bank of Pakistan (SBP) to consider increasing the benchmark interest rate to counter inflation, and the economy will slow further. Pakistan’s fiscal deficit is also expected to touch almost $24 billion, the highest ever on record.
Experts’ opinion on Pakistan’s economy
Ismail Iqbal Securities Head of Research Fahad Rauf told The Express Tribune that the domestic capital markets, including Pakistan Stock Exchange, may come under pressure if SBP increases the interest rate.
Arif Habib Limited Head of Research, Tahir Abbas, said that the economy will remain affected due to big global developments. However, he said that the International Monetary Fund (IMF)’s $6 billion loan programme can help to improve the situation in Pakistan.
Pakistan may face a serious BoP crisis
Tahir Abbas also talked about the negative impact of soaring oil prices on Pakistan’s economy. He said the international crude oil prices had bounced back to over $110 per barrel during the holidays in Pakistan. He said that a surge in oil prices can further widen the energy import bill for Pakistan.
European countries are struggling with an energy crisis and its effects are being felt in Pakistan.
According to experts, Pakistan may face a serious balance of payment (BoP) crisis as the SBP’s reserves have fallen to a perilous level of $11 billion, which is not enough to even cover one-and-a-half months of imports. The rising energy import bill may also persuade the central bank to increase the benchmark interest rate.