Karachi, June 14, 2023: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has voiced its disappointment regarding the decision to maintain the benchmark policy rate unchanged.
FPCCI President Irfan Iqbal Sheikh expressed profound disappointment in the State Bank of Pakistan’s latest Monetary Policy Committee (MPC) meeting, where the key policy rate was kept at 21 percent.
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In a statement on Wednesday, Sheikh emphasized the urgent need for proactive policymaking to avert a potential economic collapse. He criticized the decision to maintain the status quo, stating that it is the easiest approach for policymakers. According to Sheikh, policymakers must recognize that commercial banks are reluctant to lend to the private sector at rates below 24 percent, given the current 21 percent key policy rate. Consequently, access to finance for industries in the country is practically non-existent due to affordability and repayment constraints.
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It is worth noting that inflation in Pakistan is deeply rooted and primarily stems from substantial exchange rate depreciation, a significant increase in international commodity prices, multiple rounds of energy tariff hikes, and other measures imposed by the IMF.
Sheikh explained that despite the substantial and progressive policy rate hikes of 1,125 basis points, from 9.75 percent to 21 percent, over the past five quarters, general inflation has stubbornly remained high. In fact, it has surged to 38 percent, reflecting a clear failure of the monetary policy.
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As the President of FPCCI, representing the apex trade and industry body of Pakistan, Sheikh raised questions regarding the government’s seriousness in promoting transparency and consultation in economic policymaking. He reiterated the need for the government to provide answers to two critical sets of questions, enabling businesses to plan for the future. These questions involve clarifications on the factors or obstacles hindering the IMF deal and the government’s actions to address them, as well as the steps planned to stabilize the economy after the resumption of the IMF program and how and when the government intends to engage the business community in these plans.
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In summary, the FPCCI expresses disappointment over the decision to maintain the policy rate unchanged and highlights the urgent need for proactive measures to prevent an economic collapse. The organization calls for transparency and consultation in policymaking and urges the government to address crucial concerns regarding the IMF deal and future economic stabilization efforts.
