The Karachi Interbank Offered Rate (KIBOR) jumped sharply across all maturities on Tuesday after the State Bank of Pakistan (SBP) increased its policy rate by 100 basis points to 11.50 percent, triggering an immediate adjustment in money market rates.
Fresh data issued by the central bank showed benchmark interbank lending rates moving higher across the board, with the strongest reaction seen in short-term tenors as banks swiftly repriced funding costs following the monetary tightening decision.
KIBOR Movement After Policy Rate Increase
| Tenor | New KIBOR Rate | Change (bps) |
|---|---|---|
| 1-Week | 11.88% | ▲ 99 bps |
| 2-Week | 11.89% | ▲ 99 bps |
| 1-Month | 11.93% | ▲ 94 bps |
| 3-Month | 11.79% | ▲ 50 bps |
| 6-Month | 11.87% | ▲ 43 bps |
| 9-Month | 12.26% | ▲ 34 bps |
| 1-Year | 12.30% | ▲ 34 bps |
The sharp spike in shorter-duration rates signals immediate liquidity tightening in the banking system, as financial institutions reacted quickly to the central bank’s hawkish stance.
In contrast, increases in longer-tenor KIBOR were relatively smaller, suggesting market expectations that interest rates could stabilize in future monetary cycles if external pressures, including geopolitical risks, begin to ease.
Interbank rates had remained largely stable during the previous easing phase, making the latest move a clear shift toward tighter financial conditions.
The rise in KIBOR is expected to transmit rapidly across the economy, pushing up borrowing costs for businesses, banks, and consumers. Companies relying on floating-rate financing, as well as individuals with variable-rate loans, are likely to face higher financing expenses in the coming weeks.
