FPCCI criticises monetary policy

ISLAMABAD: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has criticised the rate hike of 100 basis points by the central bank, urging it to avoid a contractionary monetary policy.

FPCCI Senior Vice President and Budget Advisory Council Chairman Syed Mazhar Ali Nasir on Wednesday urged State Bank of Pakistan Governor Tariq Bajwa “to avoid a contractionary monetary policy at this stage, and ease it to control the adverse effects of recession, sustaining the overall growth momentum”.

He said that the rate hike of 100bps to 7.50 percent per annum would multiply high inflation. “(This) State Bank move would hit hard the overall economy as the availability of money to the business community would be more expensive now after jump in the discount rate,” the FPCCI senior VP said in a statement.

The FPCCI official argued that the upward revision in lending rate would translate in multiplying high inflation and increasing the cost of production that would further paralyse the already numb industries.

“Increasing the policy rate to 7.5 percent is not appropriate at this time when foreign competitors are coming to Pakistan with low interest rate in their respective countries particularly in the backdrop of CPEC (China-Pakistan Economic Corridor). Moreover, rising trend in interest rate will discourage local investors to participate in various mega projects,” he said.

Nasir further said that revival in the growth of industry and services was essential to sustain economic growth, which was showing an increasing trend after many years. The official reiterated FPCCI’s stance that increase in inflation was mainly due to recently rising prices of petroleum products, locally coupled with rupee devaluation.

Skyrocketing inflation in the wake of continuing rupee devaluation against the dollar would be extremely disastrous for the economy.