The State Bank of Pakistan (SBP) on Monday announced the latest Karachi Interbank Offered Rates (KIBOR), reflecting the borrowing and lending rates in the interbank market as of May 16, 2022. KIBOR serves as the benchmark interest rate used by banks for lending to one another and is an essential indicator for the broader financial market.
The newly issued KIBOR rates show a range of fluctuations across different tenors, signifying changes in the financial market and the underlying cost of borrowing for banks. These rates are crucial not only for the banking sector but also for businesses and individuals seeking loans or financial products, as KIBOR is widely used to determine interest rates on various financial instruments.
The one-week and two-week tenors recorded a steady rise, reflecting short-term market liquidity trends. The one-week KIBOR stands at a bid rate of 12.27% and an offer rate of 12.77%, while the two-week tenor shows slightly higher rates, with a bid of 12.40% and an offer of 12.90%. These short-term rates are crucial for banks needing immediate liquidity to meet their short-term obligations.
For longer-term borrowings, the one-month KIBOR bid rate stands at 12.93% with an offer rate of 13.43%, indicating an upward movement compared to previous weeks. The three-month KIBOR has experienced a noticeable increase, with the bid at 14.76% and the offer at 15.01%. This reflects market expectations for tighter monetary conditions in the near future, as inflationary pressures persist and the central bank remains focused on curbing rising inflation.
The six-month KIBOR, often used as a benchmark for medium-term lending, has also seen a rise, with a bid rate of 14.82% and an offer of 15.07%. Similarly, the nine-month rate stands at a bid of 14.73% and an offer of 15.23%. These rates suggest that the banking sector anticipates sustained upward pressure on borrowing costs in the medium term.
For long-term borrowing, the one-year KIBOR stands at 14.70% for bids and 15.20% for offers, indicating that market participants expect higher interest rates to persist over the coming year.
The increase in KIBOR across all tenors reflects the State Bank’s continued efforts to control inflation and manage liquidity in the economy through tighter monetary policy. Higher borrowing costs, as reflected in KIBOR, are likely to impact consumers and businesses by raising the cost of loans and other credit facilities.
