(March 9): Pakistan’s central bank held its key policy rate citing economic uncertainty after oil prices surged as the Strait of Hormuz remained largely closed and the US threatened to deepen a conflict that has upended energy markets.
The decision was taken to keep the rate at 10.5%, the central bank said in a statement on Monday. Majority analysts predicted that the central bank will keep interest rates unchanged, according to a Bloomberg survey.
Pakistan is particularly vulnerable as oil surges towards US$120 a barrel, given its heavy reliance on imported fuel that widens the current-account deficit and adds to inflation, already running at 7%. A sustained spike could pressure the rupee and complicate its commitments under the IMF programme aimed at stabilising the economy.
The government increased fuel prices to unprecedented level over the weekend with 55 rupees hike which further add pressure on the price gauge.
“The 55 rupees hike in fuel prices will have a ripple effect and inflation may accelerate around 9.25% in the last quarter [April-June],” said Muhammad Awais Ashraf, Director Research at AKD Securities.
The government has projected 4.2% growth for the fiscal year that began in July 2025, a target that now looks increasingly difficult amid the Middle East crisis, heavy monsoon floods that displaced three million people, and supply-chain disruptions linked to clashes with Afghanistan.
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