Industrialists and traders have rejected the latest interest rate hike, terming the move as “anti-business and anti-growth”, and said inflation was demand-push, not demand-pull, phenomenon.
The reaction came as the State Bank of Pakistan’s Monetary Policy Committee jacked up the interest rate to 17 percent – a 25-year high.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Irfan Iqbal Sheikh said the business community was in shock and clueless as to how they would cope with the fallout on economic activities, the viability of doing business and its inevitable adverse impacts on exports.
“The current wave of inflation is in no way a demand-pull phenomenon but, by all indicators, it is a demand-push phenomenon,” he stressed.
Sheikh said what the businessmen needed at the moment was an expansionary monetary policy but, yet again, the State Bank of Pakistan had given a contractionary monetary policy.
He warned that Pakistan would not be able to compete with the regional markets if the interest rates, especially for export refinancing, were not decreased drastically.
High cost of production amid a volatile rupee-dollar parity, uncertainty in the political and economic environment and high-interest rate would further dampen overall business activities and crush small and medium enterprises, the FPCCI chief warned.
He said if the government does not interfere immediately, there would be a lot of bankruptcies, while many export orders would not be fulfilled resulting in huge job losses and tax revenues.
Therefore, Sheikh urged the government to instantaneously start a consultative process with all the stakeholders to find a workable way out of the current crisis.
Korangi Association of Trade and Industry President Faraz-ur-Rehman said the interest rate hike would not only fuel inflationary pressures but it seems the SBP wants industrialists to lock up their units and earn easy profit by keeping money in banks or investing in risk-free government securities.
He said no industry could afford to do business at a 17 percent rate in the current financial crisis and added that the move would lead to the end of industrial development and the closure of industries causing huge unemployment.
Rehman demanded that the interest rate should be reduced immediately to save the industries from closure, otherwise the economic crisis would take an ugly turn.