The State Bank of Pakistan on Saturday announced to increase its main interest rate by 100 basis points to 8.5 per cent for the next two months, citing rising inflation and economic worries over the large fiscal and current account deficits, Radio Pakistan reported.

The central bank, while issuing the monetary policy statement, said “concerns on the economic front continue to persist on the back of rising inflation and large twin deficits ...(and) are likely to compromise the sustainability of the high real economic growth path”.

The widening current account deficit has fuelled widespread speculation that Pakistan may need another bailout from the International Monetary Fund.

The newly announced interest rate will be effective from Monday for the next two months.

Earlier this week, the SBP had said that a number of factors, including increasing inflation and volatile commodity markets, are a threat to financial stability in the next six months.

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