Pakistan’s central bank raised its key rate by 100 basis points to 22% in an emergency meeting on Monday, it said in a statement.

“MPC [Monetary Policy Committee] of SBP convened an emergency meeting today, where it noted that potential upside risks to the inflation outlook have increased from the last meeting, and accordingly decided to raise the policy rate by 100bps to 22%,” the State Bank of Pakistan said.

The meeting came a day after the country passed a heavily adjusted annual budget in hopes of securing a last gasp bailout from an International Monetary Fund programme that expires on June 30.

The MPC viewed that such risks were mainly coming from the implementation of new measures in the fiscal and external sectors, which were important in the context of completion of the ongoing IMF programme.

The bank said its monetary policy committee had noted “two important domestic developments since the last meeting that have slightly deteriorated inflation outlook and which could potentially increase pressure on the already stressed external account.”

These developments include certain upward revisions in taxes, duties and petroleum levy rate in the recently approved FY24 budget, and the central bank withdrawing on June 23 its general guidance for commercial banks on prioritisation of imports.

The committee was of the veiw that the decision would help further anchor inflation expectations – which are already moderating over the last few months, and support bringing down inflation towards the medium term target of five to seven per cent by the end of FY25, barring any unforeseen developments.

“The MPC views that today’s decision - along with the expected completion of the ongoing IMF program and the government adhering to the target of generating a primary surplus in FY24 would help in addressing external sector vulnerabilities and reduce economic uncertainty,” it said.