President of Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Mian Anjum Nisar while showing serious reaction on SBP reduction in interest rate by one percent said that despite clear message by all segments of economy particularly trade and industry the SBP reduction of one percent policy rate is surprising and unfavorable to bleeding economy.
He said that given the current deteriorating economic situation all the Central Banks are supporting by significant reduction in interest rate along with stimulus packages while current decision is not based on forward-looking inflation.
He further stated that the FPCCI deplores the regulator's conservative stance where the speed and the magnitude of the response do not match the havoc caused by the virus.
FPCCI completely agrees with the external account situation detailed in their monetary policy statement where current account deficit will remain in control as was the case in April. He said that May and June imports will be even lower than 3 billion per month on account of fewer orders placed by importers due to depressed demand under lockdown.
Mian Anjum Nisar further said since the external situation is manageable as per SBP, there is sufficient information available on the inflation front to forecast a much lower rate than 7-9 percent forecasted for next year by SBP.
Importantly, SBP in their 17th March, 2020 MPC press release stated: "Average headline inflation is expected to remain within the SBP's 11-12 percent forecast in FY20, before falling to the medium-term target range of 5-7 somewhat earlier than previously forecast."
FPCCI based on its own research tends to agree with SBP's earlier assessment of 5 percent anticipated inflation. We would have understood a cautious approach if the situation was normal but in these unprecedented times, we urge the regulator to appreciate the gravity of the situation where most businesses are expected to accrue markup when their sales are ZERO.
The need of the hour is to take a more aggressive approach to policy making where what can be done tomorrow should be done today.
FPCCI acknowledges the regulator's approach on refining their decisions and policies based on constructive feedback as has been demonstrated in multiple improved iteration of various refinance schemes. In the same spirit, we stand ready to work closely with the regulator in our quest to bring down the rate to 5 percent in the shortest possible time.
Mian Anjum Nisar President FPCCI urged the SBP to shift its pre Covid-19 mindset and adopt the policies according to the sentiment of the Prime Minister Imran Khan and businesses community to bring economy out from crises.
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