This is apropos a Business Recorder front page photograph titled “Interest hammer’ carried by the newspaper yesterday. The picture shows the members of ATTAC, wearing masks depicting European Central Bank (ECB) President Christine Lagarde and President of German Federal Bank Bundesbank Joachim Nagel, hold ‘interest hammer’ during a protest against the ECB monetary policy.
The European Central Bank has raised interest rates for the ninth consecutive time on Thursday. The ECB has now lifted borrowing costs by a combined 425 basis points since last July. The ECB is said to have embarked on a interest rate hike spree with a view to fighting off rising inflation in an effective and meaningful manner.
Having said that, I wish to ask our policymakers what does the frequent rate hikes in EU mean for Pakistan’s exports, workers’ remittances, and FDI as about one-third of Pakistani exports reach the EU market? Moreover, what about workers’ remittances from the EU? Remittances from the EU countries, excluding the UK, had been growing at a very fast pace since 2010-11.
We also must not lose sight of the fact that remittances sent home by Pakistanis abroad fell to $27 billion for the entire fiscal year 2022-23 compared with $31.3 billion a year earlier. Price hike and inflation have been constituting challenges everywhere; Pakistan is no exception either.
We have a 22 percent interest rate to do business. How can it be workable? Adding insult to the injury, State Bank of Pakistan is said to be mulling increasing interest rate further at its upcoming monetary policy committee meeting! Last but not least, rising interest rates in developed countries and economies can help policymakers achieve the desired results.
But this is not possible in economies like ours because half of our economy remains part of informal or undocumented sector.
Wajahat Husain (Dubai)
Copyright Business Recorder, 2023
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