The 6-Month Karachi Inter-Bank Offered Rate (KIBOR), a benchmark for lending to consumers and businesses, fell by 20 basis points (bps) on a day-on-day (DoD) basis as this week’s below-par domestic bond performance convinced market players that the central bank might finally bring the benchmark policy rate below 22 percent coming Monday.
According to the State Bank of Pakistan (SBP) data, the 6-month KIBOR clocked in at 20.62 percent, the lowest since March 2, 2023, after the mid-week secondary market auction which saw the government raise Rs. 185 billion debt at rates below the central bank’s policy rate.
CEO Topline Securities Mohammed Sohail said in a post on X, “After surprise fall in yields in yesterday’s T-bill auction, today’s benchmark lending rate (6 months Kibor) fell from 20.82% to 20.62%, which is almost one year low. This lending rate peaked at 24.71 % in Sep 2023″.
The other widely used 3-Month KIBOR was down 15 bps and was recorded at 20.62 percent. The 1-year KIBOR slid by 18 bps to 20.84 percent.
This week’s T-bill auction saw a declining trend where the rate on the 3-month paper went down to 20.49 percent on Wednesday. Yields on the 6-month and 12-month papers dropped down to 20.4 percent and 20.2 percent, respectively.
Besides the Rs. 102 billion debt raised via competitive bidding, the government raised Rs. 82 billion through non-competitive bids, taking the total amount raised during the auction to Rs. 185 billion.
The inflation rate according to official figures is 44%. By this standard key interest rates at 22% pa are still too low and must be at least at 45% to sustain the purchasing power of monetary assets)savings kept by savers in bank deposits, government securities etc and to save them from erosion of their savings.