‘Increase in policy rate to further damage investment climate’

KARACHI: Former State minister and former chairman Board of Investment Muhammad Azfar Ashan has said that increase in policy rate will further damage investment climate in the country.

Commenting on Monetary Policy Committee (MPC) decision, he said that the State Bank of Pakistan (SBP) surprised the industrial sector particularly and the business community at large by raising the policy rate to 22 percent.

This Monetary Policy Committee meeting held out of turn and the decision announced created a shockwave in the corporate world, he added.

Azfar Ashan said that this is an indication that the country’s economy facing demand pressure and this will not going to ease in the near future. The SBP is expecting even increase in inflation numbers. A rise in the policy rate will have adverse effects on the investment.

Banks will charge at least 3 percent on policy rate of 22 percent to land to private sector, which will get loan on 25 percent. At this rate no industry or business will be able to borrow and can do the business, he mentioned.

As in the country most of the loans are on a floating rate and loan issued during the lower policy rate regime also face increases on the same way. This could lead domestic, commercial, and industrial borrowers to default, he added.

He said that high policy rate and higher ever inflation adversely affecting the time economy and business.

The economic survey showed that industries shown negative growth of 2.4 percent, services sector 0.86 percent and argricultural sector showed growth of 15.6 percent.

In addition, due to decline in rupee value against dollar and slowdown in economy the per capita income of common Pakistani is also shown downhearted trend.

Copyright Business Recorder, 2023