PAKISTANS central bank should refrain this weekend from raising its benchmark interest rate, one of the worlds highest, as doing so may hurt the economy damaged by floods and war, said Husain Lawai, a banker, reported Bloomberg. Even with tight monetary policy, inflation is still leaping upward, Lawai, who is chief executive officer of Summit Bank Ltd., said in an interview in Karachi. A further increase in rates may hurt economic growth and put pressure on the productive sector. SBP Governor Shahid Kardar, who is scheduled to announce the next rate decision on Jan 29, has said rising public debt is forcing him to raise interest rates, crowding out investment and undermining economic growth. The State Bank of Pakistan has increased its benchmark interest rate three times since July, from 12.50 percent to 14 percent in its last review in November. Instead of increasing interest rates the central bank should raise the cash reserve requirement and the statutory liquidity requirement by half a percentage point each to contain credit, said Lawai, 64, a former CEO of MCB Bank Ltd., the biggest by market value. Under the so-called cash reserve requirement, banks are required by the central bank to set aside 5 percent of deposits held for less than a year. They must also keep 19 percent of these deposits in bonds approved by the central bank. These levels were last changed in November 2008 when they were reduced. Raising these rates would mean commercial banks will have less cash to lend, said Ahmed Raza Khan, head of research at IGI Finex Securities Ltd in Karachi. The central bank increases interest rates to keep the government from borrowing. Pakistan is battling against inflation after the worst floods in the nations 63-year history struck in 2010. The Asian Development Bank and World Bank estimate the natural disaster caused about $10 billion of damage.