{"id":1603,"date":"2023-09-08T00:04:06","date_gmt":"2023-09-08T00:04:06","guid":{"rendered":"https:\/\/news.pakistaninewspaperlist.com\/lending-costs-at-record-high-the-express-tribune\/"},"modified":"2023-09-08T00:04:06","modified_gmt":"2023-09-08T00:04:06","slug":"lending-costs-at-record-high-the-express-tribune","status":"publish","type":"post","link":"https:\/\/pakistaninewspaperlist.com\/news\/lending-costs-at-record-high-the-express-tribune\/","title":{"rendered":"Lending costs at record high | The Express Tribune"},"content":{"rendered":"
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\nKARACHI:
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Commercial banks jacked up the cost of lending to a new record high at 24.62% on Thursday, which strongly indicated that the central bank was considering increasing its benchmark policy rate to a new all-time high next week.<\/span><\/p>\n

The surge in the lending rate has badly impacted the government \u2013 the largest borrower from commercial banks over the past four years. Besides, the high cost will continue to discourage the private sector to borrow funds for running their businesses, prolonging economic depression in the country.<\/span><\/p>\n

Market talk suggests the SBP may increase the policy rate by 1.5 percentage points to 23.5% on September 14. The bank may do so to control the high inflation, which stood at an average of 27.8% in Jul-Aug mainly due to increase in power and petroleum product prices.<\/span><\/p>\n

The central bank reported that commercial banks increased their benchmark six-month Karachi Inter-bank Offered Rate (Kibor) by 1.02 percentage points to 24.62% on Thursday compared to 23.60% on Wednesday.<\/span><\/p>\n

Also read<\/strong> PDM govt borrowed Rs907b in just one month<\/a><\/p>\n

On July 31, 2023, the day when the central bank left its policy rate unchanged at 22%, Kibor stood at 23.22%.<\/span><\/p>\n

The surge in Kibor came after the cash-strapped government paid a high price of nearly 25% to borrow Rs1.33 trillion for three to 12 months on Wednesday.<\/span><\/p>\n

Data breakdown suggests the cut-off yield (interest rate on government borrowing from banks) on three-month T-bills surged 1.62 percentage points to a record high at 24.49%. The yield spiked to 24.78% on six-month papers and rose sharply by 2.13 percentage points to 25.06% on 12-month instruments in an auction.<\/span><\/p>\n

Out of the total new debt of Rs1.33 trillion raised from banks, the government borrowed the most \u2013 Rs1.25 trillion \u2013 by selling three-month T-bills to commercial banks.<\/span><\/p>\n

Arif Habib Limited economist Sana Tawfik said in a commentary post T-bills auction, \u201cWe expect the SBP to increase the policy rate by 150 basis points to 23.5% on September 14.\u201d<\/span><\/p>\n

In September\u2019s policy, \u201cwe believe the SBP might consider increasing interest rates as a precautionary measure to address the persistently high levels of inflation\u201d, the analyst added.<\/span><\/p>\n

Published in The Express Tribune, September 8th<\/sup>, 2023.<\/span><\/em><\/p>\n

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