Karachi - Pakistan's central bank on Tuesday raised its benchmark interest rates by one per cent, the third such move since January to fight galloping inflation and to stop alarming government borrowing.

"Our inflation is reaching alarming levels mainly due to borrowing," said State Bank of Pakistan (SBP) Governor Shamshad Akhtar while announcing the monetary policy for the fiscal 2008-09 (July-June).

Akher said raising the rate to 13 per cent would help in curbing rampant government demand as borrowing had doubled in six months, constituting 80 per cent of the entire fiscal deficit that was equivalent to 8.3 per cent of the GDP.

The governor lambasted the country's newly-elected fractured parliamentary coalition government for its unbridled appetite for asking the bank to print more money, further fuelling inflation.

She said the government had borrowed 204 billion rupees in the first quarter of the year 2008 and 283.9 billion in the second.

"For the first time the entire board of directors of the central bank will pass a strong resolution to ask the government to stop its borrowing," Akhtar said.

Facing economic and financial consequences of soaring international oil and commodity prices, the government is also beleaguered by insurgency in two of its provinces
- the North West Frontier Province and Balochistan.

The continuous internal and external pressures have already caused an erosion of the central bank foreign exchange reserves by 6.5 billion dollars to just 17 weeks of import against 31 weeks six months ago.

Akhtar said the country's food inflation had already reached an all-time high of 32 per cent while the overall core inflation was also sitting on a 30-year high. (dpa)