How did Bangladesh Takka become more Economically Stable?

The State Bank of Pakistan raised its benchmark interest rate to 12.25 percent in an attempt to curb rising inflation amid a weak rupee and an elevated fiscal deficit. And with the present finance bill, all the government on the behest of the IMF has done has pushed the economy towards further cash transactions and hindered formalizing the economy. The interest rate in Pakistan was at a record low of 5.75 percent in May of 2016. This is why businesses flourished in the last 4-5 years and investments were being done creating new opportunities for Pakistan.

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An estimate of M0, M1, M2, and M3 Money in Pakistan

As a general rule of thumb every 7% increase in the inflation rate doubles the total amount of money in existence every 10 years. At 14% it would be 4x the original amount in 10 years. KIBOR went up from 5.75% (a record low in the history of Pakistan) in May 2016 to 12.25% as of today. More than double the increase in the last two years. The way I see it is that the Government is trying to incentivize people to hold their reserves in the banks or in bonds instead of in gold or other solid assets etc. On one hand, this is not good for the industrial sector and companies since their stocks will tank as people sell stocks and buy bonds, etc but on the other hand, the government wants to strengthen the rupee since the current inflation rate of 8.25% can still devalue the currency and lead to hyperinflation if not handled properly.

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