Pakistani Banks Raise Lending Cost to Record High at 24.62%

Karachi, September 8, 2023 – Analysts have reported that Pakistani banks have raised lending costs to a record high of 24.62 percent, indicating potential actions by the central bank to increase its benchmark policy rate to an all-time high in the near future.

According to analysts at Tresmark, commercial banks raised lending rates to a new record high on September 7, 2023. This significant increase in lending rates strongly suggests that the State Bank of Pakistan (SBP) is considering raising its benchmark policy rate to a new all-time high in its upcoming monetary policy announcement next week.

The surge in lending rates has had a notable impact on the government, which has been the largest borrower from commercial banks over the past four years. Additionally, the high borrowing costs are likely to continue discouraging the private sector from seeking loans to run their businesses, potentially prolonging economic challenges in the country.

Market speculation suggests that the SBP may increase the policy rate by 1.5 percentage points to 23.5 percent on September 14. This potential rate hike could be aimed at curbing high inflation, which averaged 27.8 percent in July and August, primarily due to increases in power and petroleum product prices.

The central bank has reported that commercial banks raised their benchmark six-month Karachi Inter-bank Offered Rate (Kibor) by 1.02 percentage points to 24.62 percent on Thursday, compared to 23.60 percent on the previous day (Wednesday).

The decision to raise lending rates reflects the central bank’s efforts to address inflationary pressures and maintain macroeconomic stability. However, it also poses challenges for borrowers, both in the public and private sectors, who will face higher borrowing costs in the current economic environment.

Pakistani Banks Raise Lending Cost to Record High at 24.62%

Shahnawaz Akhter

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