Resolving crises: Expert suggests cut in interest rate, energy tariffs

KARACHI: “If we have to seriously pull out the country from crises, two radical decisions have to be made, reduction in interest rate up to 4 percent and cut in electricity and gas tariffs,” said economic and financial analyst Ateeq Ur Rehman.

In January, SBP stated that it will maintain the basis point at the current level of 7 percent until the economy gets back to full capacity, further it will remain unchanged for inflation, economic activities and support to businesses.

Therefore, SBP maintained the basis point for next two months, Ateeq said adding for business communities, it is not favorable as with this higher interest rate the capacity to expand business is limited and access to finance is still difficult for exporters, importers, industrialists, manufacturers, traders, SMEs and startups.

Only in this month, the federal government approved SBP Amendment bill 2021 under which SBP would have absolute autonomy to check inflation and control prices and draft monetary and fiscal policies, he said.

How can inflation be alone responsibility of SBP, he asked adding that the federal, provincial and local governments’ role is equally important in this regard. Further, the participation from the business community is also missing at SBP, thus creating a space in formulation of feasible policies. Such high interest rates are impediments in the growth of Economy and controlling the ballooning inflation on a day to day basis.

Rehman said we are one of the most highly taxed electricity consumers in the world with an enormous burden of almost Rs 2.6 trillion load of circular debt. Under prevailing situations, reduction in interest rate is inevitable.

Copyright Business Recorder, 2021