FPCCI says monetary policy ‘regressive, contractionary’

KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) rejected a recent increase of 100 basis points in the central bank’s policy rate on Tuesday, saying the business, industry, and trade communities were shocked and clueless on how to cope with its fallout on economic activities.

“What we needed at the moment was an expansionary monetary policy; but, yet again, SBP [State Bank of Pakistan] has given a contractionary monetary policy,” FPCCI president Irfan Iqbal Sheikh said.

He added that businesses were concerned about the impact of SBP decision on viability of doing business in the country.

“If the interest and export refinancing rates are not decreased drastically in Pakistan, we will not be able to compete with the regional countries as well,” FPCCI chief warned, explaining that making formal and banking channels out of reach for businesses for their financing needs would give a boost to the informal economy.

Sheikh stated that there was a consensus among economists that the current wave of inflation was in no way a demand-pull phenomenon but a demand-push phenomenon.

Outlining real factors, he said volatile rupee-dollar parity, uncertainty in political and economic environment, and the policy rate at 17 percent would crush businesses, especially small and medium sized businesses (SMEs).

“The cost of doing business, ease of doing business, access to capital, access to foreign exchange, and remaining profitable will all be next to impossible for SMEs.”

He further stated that if the government didn’t interfere immediately, there would be a lot of bankruptcies, as export orders would not be fulfilled, leading to huge loss of employment opportunities, and a loss of tax revenue.

FPCCI chief called upon the government to start a consultative process with all stakeholders to find a workable way out of the current crises.