With the spread of the coronavirus to many countries, world markets have tumbled. Global bond/treasury yields have hit lows not seen in many years. Various governments are mulling providing stimulus to arrest the economic downslide. In Pakistan, yields on treasury bills/PIBs as well as borrowing cost from banks remain high as the SBP's key interest rate has been artificially kept at the exorbitant level of 13.25 percent. This is discouraging private-sector investment and increasing the interest burden of the government. Owing to the flawed policy, it becomes more attractive for an investor to put his/her funds in the bank or invest in government paper and earn risk-free profit rather than set up businesses and industries. Will the Ministry of Finance revisit the monetary policy which is driving away investment and parking the idle money in bank deposits and government instruments? At present, banks are flushed with liquidity as there is a lower number of borrowers.
It is wrong to assume that the inflationary pressure in the country has relevance with monetary expansion. The ground realities in Pakistan are totally different from the situation that prevails in the advanced countries and therefore the set of Western-prescribed measures to control inflation are not applicable here. May God give some semblance of sanity to our planners.
Arif Majeed
Karachi