Tag: interest rate

KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has expressed concerns over recent significant rise in key policy rate by State Bank of Pakistan (SBP).
In a statement on Wednesday Engr. Daroo Khan Achakzai, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) showed his serious concern over the hiking of policy rate by another 150 basis points in view of prevailing inflation, devaluation of currency and twin deficit in Pakistan.
He added that SBP continues to operate a tight monetary policy despite the clear evidences that this policy strangulates investment and hampered the economic activities in Pakistan in Pakistan.
He underlined that the IMF bailout package will further create burden on poor segment of society in terms of rising utility prices which will ultimately increase inflation in the economy.
At present, every Pakistani possess a debt of one lac fifty nine thousands rupees.
The President FPCCI termed the contractionary monetary policy as an anti-investment policy which has declined the economic activities in the first ten month of the current fiscal year due to declining of large scale manufacturing and service sector.
He indicated that 12.25 percent policy rate is very high compared to regional economies like India 6.0 percent, China 4.35 percent, Sri Lanka 9.0 percent, Thailand 1.75 percent, Indonesia 6.5 percent, Malaysia 3.00 percent etc.
While commenting on the devaluation of currency, he stated that the rising of exchange rate will increases the prices of imports particularly petroleum products which comprises 30 to 35 percent import bill of Pakistan.
He suggested the government to intervene in the economy for currency stabilization and control of inflation. He said that the present inflation rate is 7.0 percent which is high compared to last year same period 3.8 percent; but this inflation is cost push inflation which can’t be controlled through demand management policies.
The major cause of rising inflation in the country is high cost of doing business particularly utility prices, increase in the prices of industrial inputs and shortage of essential items of daily necessity.
The Government should focus to increase the demand for credit by declining interest rates and make easy access to finance. Globally, the aim of monetary policy is to protect the value of the currency in co-ordination with the fiscal policy in order to achieve the objectives of macro-economic stability with constraining inflation and expansion of private sector investment, he added.
The President FPCCI further stated that the government should create its own fiscal space for financing its expenditures instead of borrowing from SBP and other institutions. During the first ten month of year, there was an expansion in private sector credit, but is largely attributed to working capital due to rising of input prices.
This private sector credit should be expanded to agriculture and industrial sector which are showing declining growth trend, he suggested.