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Pakistan food price inflation to hit record high

KARACHI - Pakistan's food price inflation is set to register another record high by the end of this month, the head of the central bank said Monday.

"Food inflation will touch 26 per cent and maybe more in the upcoming days," State Bank of Pakistan Governor Shamshad Akhtar said. The bank is also fighting a tough battle to stem overall inflation due to soaring international oil prices amid domestic and worldwide food shortages.

Pakistan's annual inflation has already doubled from 12.5 per cent to 25.5 per cent while the overall core inflation is also touching double digits.

"I think our core inflation is going to be a record high of around 10 to 11 per cent, I think 11 per cent," Akhtar said in an interview with CNBC television.

The central bank on Thursday took drastic measures to rein in government borrowing and tried to put brakes on inflation by raising benchmark interest rates by 150 basis points to 12 per cent.

The huge hike in interest rates shook the stock and financial markets as the main Karachi Stock Exchange fell by 4.5 per cent on both Friday and Monday.

Akhtar defended the measures, saying government borrowing and inflation had reached a point where a rate increase was inevitable.

"If we wouldn't have done so (raising the rates on Thursday) we might have been raising the interest by 300 per cent in future," Akhtar said.

Despite the stock market's woes, the central bank measures eased pressures on the Pakistan rupee and allowed it to gain about 3 per cent against the US dollar since Friday.

The rupee on Monday was trading at 67.60-68.05 (buying-selling) against the dollar in the inter-bank market after hitting as low as 70.00 at one point of time last Thursday.

The rupee had lost about 14 per cent against the US dollar during the last 10 months.

Akhtar appealed to the government again Monday to stop borrowing from the central bank.