Pakistan’s money markets witnessed a sharp turnaround on Wednesday as the Karachi Interbank Offered Rate (KIBOR) declined across all tenors following a major diplomatic de-escalation mediated by Pakistan for two of its most critical allies.
The benchmark three-month KIBOR recorded the steepest drop, falling by 26 basis points. The six-month and one-year tenors also moved lower, declining by 18 and 16 basis points respectively.
| Tenor | Bid (%) | Ask (%) | Change (%) |
|---|---|---|---|
| 1 Week | 10.38 | 10.88 | -0.03 |
| 2 Week | 10.38 | 10.88 | -0.03 |
| 1 Month | 10.58 | 11.08 | -0.02 |
| 3 Month | 11.17 | 11.42 | -0.26 |
| 6 Month | 11.36 | 11.61 | -0.18 |
| 9 Month | 11.46 | 11.96 | -0.17 |
| 1 Year | 11.50 | 12.00 | -0.16 |
This decline was local markets essentially discarding the “war premium” that had recently pushed borrowing costs higher. Banks and investors are now pricing in improved regional stability and low financial risks.
Earlier, Prime Minister Shehbaz Sharif confirmed Pakistan’s mediation role. He also announced that the federal government has invited senior delegations from both Washington and Tehran for decisive negotiations on Friday.
Doesn’t work. The inflation effects are coming in small shocks.
Interest rates must be increased now