In need of austerity

This refers to the editorial ‘Policy rate’ (November 21). There appears to be unfair criticism by the media, opposition politicians and business leaders on the 150 basis point hike in the interest rate announced by the State Bank. The decision was overdue to rein in the rising current account deficit and squandering of resources on consumption.

When the interest rate was lowered from 13.25 percent to seven percent in 2020, it was expected that the measure would lift the exports to a reasonable level. But instead, the low cost of financing has encouraged an exponential increase in the import bill, averaging around $6billion per month, for the past six or seven months. Further increase in the interest rate is needed to slow down frivolous consumption. The State Bank is appropriately using the interest rate mechanism to correct the negative trends in the economy, particularly the vulnerability of the external account that has forced the government to look towards the IMF despite harsh conditions.

Arif Majeed

Karachi