KARACHI: The Pakistan Businesses Forum (PBF) on Thursday rejected the decision by the State Bank of Pakistan (SBP) to raise the interest rate again by 125 basis points to 15%, the highest rate ever recorded in the recent history of the country.
PBF Senior Vice President Muhammad Riaz Khattak said the business community expected an interest rate cut as it was a consensus recommendation from us that monetary policy should be eased to control the adverse effects of the recession.
He said the upward revision of the lending rate would result in high inflation and an increase in the cost of production which would further cripple the already numb industries.
The SVP of the PBF said that the SBP’s decision could still hit the global economy hard as the availability of money for the business world has been made more expensive now after the new jump in the discount rate.
Khattak said the SBP should cut policy rates to boost growth, as a cut would instill business confidence and propel the economy that was hostage to past austerity policies.
He also complained that lending to the private sector by commercial banks in the current fiscal year has not accelerated, adding that the decision would neither help reduce the budget deficit nor control inflation as it had not served the purpose in the past, but rather created problems for investors.
The PBF official said that in the name of reducing inflation, the policy measures of the SBP will generate more inflation. As a result of these measures, inflation will not decrease, but it will increase further.
“The previous profit margin rate of 13.75% prevailing in Pakistan was also considerably higher than in other economies in the region.
Copyright Business Recorder, 2022