Islamabad, Jan 12: Pakistan’s benchmark interest rate stands at 11.89 percent, according to the latest data from the State Bank of Pakistan. This is lower than the central bank’s key lending rate, which is 13 percent, reflecting a 111 basis points (bps) gap between the two rates.
According to Topline Securities, the key lending rate has now dropped to approximately a three-year low, marking a significant reduction from its peak of 24.68 percent in the past 18 months. This decrease is attributed to a steady decline in inflation, which has led to the central bank’s easing of monetary policy.
The Karachi Inter-Bank Offered Rate (KIBOR), which reflects the interest rates at which banks lend to one another, has also experienced a decrease. As of January 2025:
- The 3M KIBOR has dropped by 21 bps.
- The 6M KIBOR has fallen by 23 bps.
- The 9M KIBOR has decreased by 31 bps.
- The 12M KIBOR saw a reduction of 26 bps.
Sources familiar with central bank operations have revealed that banks are offering new credit to businesses and individuals below the benchmark lending rate. This is done to avoid paying higher taxes if their advance-to-deposit ratio falls below the government-set threshold.
Additionally, the government has abolished the 15 percent additional tax on bank profits but has increased the standard corporate tax to 44 percent. This change in tax policies is likely to impact the overall lending and investment strategies of financial institutions in the coming months.
This adjustment in interest rates and taxes is expected to play a key role in shaping Pakistan’s economic landscape, particularly in terms of lending practices and inflation management.
