AGL 40.00 Decreased By ▼ -0.13 (-0.32%)
AIRLINK 192.90 Increased By ▲ 3.47 (1.83%)
BOP 9.93 Decreased By ▼ -0.41 (-3.97%)
CNERGY 7.03 Decreased By ▼ -0.18 (-2.5%)
DCL 10.30 Increased By ▲ 0.09 (0.88%)
DFML 41.15 Decreased By ▼ -0.65 (-1.56%)
DGKC 106.26 Decreased By ▼ -2.37 (-2.18%)
FCCL 37.85 Decreased By ▼ -0.74 (-1.92%)
FFBL 94.20 Increased By ▲ 4.29 (4.77%)
FFL 15.14 Increased By ▲ 0.12 (0.8%)
HUBC 121.80 Decreased By ▼ -1.43 (-1.16%)
HUMNL 14.21 Decreased By ▼ -0.24 (-1.66%)
KEL 6.10 Decreased By ▼ -0.24 (-3.79%)
KOSM 8.24 Decreased By ▼ -0.16 (-1.9%)
MLCF 49.05 Decreased By ▼ -0.42 (-0.85%)
NBP 71.40 Decreased By ▼ -3.42 (-4.57%)
OGDC 217.60 Increased By ▲ 4.19 (1.96%)
PAEL 33.81 Increased By ▲ 0.82 (2.49%)
PIBTL 9.78 Increased By ▲ 0.71 (7.83%)
PPL 198.50 Decreased By ▼ -1.43 (-0.72%)
PRL 33.70 Decreased By ▼ -0.85 (-2.46%)
PTC 26.86 Decreased By ▼ -0.35 (-1.29%)
SEARL 117.41 Decreased By ▼ -0.78 (-0.66%)
TELE 9.59 Decreased By ▼ -0.29 (-2.94%)
TOMCL 36.90 Increased By ▲ 1.48 (4.18%)
TPLP 12.00 Decreased By ▼ -0.57 (-4.53%)
TREET 24.25 Increased By ▲ 1.96 (8.79%)
TRG 60.67 Decreased By ▼ -0.23 (-0.38%)
UNITY 36.34 Decreased By ▼ -0.35 (-0.95%)
WTL 1.79 No Change ▼ 0.00 (0%)
BR100 12,039 Decreased By -125.4 (-1.03%)
BR30 37,688 Decreased By -92.4 (-0.24%)
KSE100 113,539 Decreased By -641.3 (-0.56%)
KSE30 35,480 Decreased By -221.5 (-0.62%)

LAHORE: The Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel (BMP) has warned the central bank of any further jump in the key policy rate, as it would deepen the economic crisis amidst record highest markup rate in the region.

FPCCI former president and Businessmen Panel (BMP) chairman Mian Anjum Nisar said, here on Sunday, that already unprecedented inflation and high markup rate have drastically reduced private sector borrowings during the outgoing fiscal year.

The State Bank of Pakistan (SBP) is all set to announce its latest monetary policy on Monday, with many experts fearing further hike in interest rate which is already touching the historic-high of 22 per cent.

He said that the central bank raised its key interest rate to 22 percent, exceeding investor expectations, as the cash-strapped country attempts to encourage the International Monetary Fund (IMF) to release critical funding. The key rate of the State Bank of Pakistan now stands at 22 percent, its highest level since October 1996. Now, there are reports that the SBP would raise the interest rate by another 1 percent at the upcoming meeting of the Monetary Policy Committee (MPC) to please IMF.

The Businessmen Panel (BMP) chief suggested the central bank to adopt an accommodative monetary policy stance, asking the finance minister to fulfill his commitment of reining in inflation besides cutting interest rate and strengthening the undervalued local currency against dollar.

The SBP has raised its key policy rate by 12.25 percentage points since April 2022, mainly to curb soaring inflation. However, it held rates steady in June saying inflation had peaked at 38pc in the preceding month. But before the end of the month, it raised rates by 100 bps at an emergency meeting in an effort to secure IMF funds, citing slightly deteriorated inflation outlook.

In the Memorandum of Economic and Financial Policies (MEFP) that resulted from its talks with the IMF, Pakistan said it stands ready to consider further action at the next monetary policy committee meeting and subsequent ones until inflation and inflation expectations are on a clear downward path.

The SBP on its website says: “Monetary policy involves central banks’ use of instruments to influence interest rates and/or money supply in the economy with the objective to keep overall prices and financial markets stable. Monetary policy is essentially a stabilization or demand management policy that cannot impact long-term growth potential of an economy.”

However, the ground realities are totally different when it comes to monetary policy cannot impact long-term growth potential of an economy as the record-high interest rates and inflation sky rocketing the cost of production means no one is ready to invest in productive sectors. Thus, this rate policy advocated by the IMF and pursued by top central banks will push Pakistan further into quagmire.

Demanding competitive interest rate at regional countries’ level, he said that the SBP’s stance of keeping monetary policy rate at 22 percent was already high compared to the markup rate of China, India and Bangladesh. He said that further monetary tightening and high current account deficit had sparked panic selling across the board, leading to the capital market’s massive tragedy.

Anjum Nisar said that the rate hike was a key requirement to get the IMF funding released. The MPC noted that the recent fiscal adjustments and exchange rate depreciation have led to a significant deterioration in the near term inflation outlook and a further upward drift in inflation expectations, as reflected in the latest wave of surveys.

In this context, the MPC emphasized that anchoring inflation expectations is critical and warrants a strong policy response. He said that while the CPI can potentially increase more with the fiscal actions related to subsidy removals and exchange rate weakness, the government needs to focus on improving the supply side urgently, especially of food and agricultural items.

The government, for its part, should try to cut expenditure and increase revenue through taxes, and has allowed the rupee to depreciate. He stressed the need for reduction in the discount rate, arguing that low key policy rate is essential to make the Pakistani exports sector, as well as the local industry competitive.

Anjum Nisar said that in view of achieving exports target and stabilization of the economy we need accommodative monetary policy measures by extending reduction in the policy rates so that the debt liability of the business sector is compensated through lower markup rate. The BMP chief said that trade and industry need continued support from the government in the form of lower interest rates, amid such external shocks, he suggested.

He also demanded the immediate reduction in the electricity tariff, especially for the Small and Medium Enterprises (SMEs) as a first step towards a cut in the production cost, while the second and vital step towards this direction would be bringing discount rate to the regional level with a view to provide level-playing field, especially to the export industry.

The FPCCI former president said the central bank should announce an initiative related to loans for the Small and Medium Enterprises (SMEs), as the sector has to show collateral to banks, which are always reluctant to offer them concessional credit.

Copyright Business Recorder, 2023

Comments

Comments are closed.

Imran Sheikh Jul 31, 2023 09:17am
The banks don't trust small businessmen, the businessmen don't trust the tax department, and nobody trusts the government and their backers at all. In this climate, how can the economy, which is driven by business, thrive? Listen to the businessman! He has skin in the game. Bureaucrats and military have none, so do not face consequences of bad decisions directly.
thumb_up Recommended (0)
Mir Adnan Yakub Aug 01, 2023 08:02am
Interest hike may go further up-to 25%. Handy capped govt cannot control anything. As long honesty based general elections are conducted. Pakistan is in dark since 1947, becoz of interference of greedy politicians, judiciary and army chief. No punishment to anyone, due to , corrupt institutions backing their own corrupts. Heading towards disaster. Let above mentioned bosses to enjoy, good for certain group of people. My comments are based on honesty, whatever a common person learnt from this corrupt nation.
thumb_up Recommended (0)