The State Bank of Pakistan (SBP) has imposed a 35 per cent margin on most import letters of credit (L/Cs) as one measure in the central bank's battle to tame the country's spiralling inflation.

Inflation in Pakistan is at its highest since the 1970s, the rupee is close to an all-time low, and markets had been rife with speculation SBP would raise interest rates.

Rates and margins

In its most far-reaching move to curb inflation, the SBP increased its key discount rate to 12 per cent from 10.5 per cent to counter accelerating inflation as well as widening fiscal and current account deficits.

The bank took another step to dampen import demand by imposing a 35 per cent margin on L/Cs for all imports except oil and food.

Inflationary pressures

The central bank last raised its rates in January 2008 to 10.5 per cent.

In common with countries across the world, inflation in Pakistan has been exacerbated by sky-high oil and gas prices as well as world food shortages.

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