S M Tanveer, Patron-in-Chief United Business Group (UBG), has expressed disappointment over the monetary policy, saying that the rate cut by 200 bps or 2 percent is too little, too late in the context of price data – domestically & internationally.
He said the core inflation is going to be around 7.0 percent for the month of September 2024 as per market estimates. On top of that, international oil prices have come down to a 3-year low at less than $70 per barrel this week.
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Tanveer said the business community was expecting that the SBP had all it takes to announce a substantive rate cut; but, it has still held on regressive, counterproductive, and contractionary monetary policy practices.
He pointed out that the cost of doing business; ease of doing business and access to finance in Pakistan is at the lowest as compared to all its competitors in the export markets. The only viable solution to get back on economic growth trajectory is to support industry and exports, he added.
He said State Bank of Pakistan (SBP) should focus on core inflation rather than general inflation on an immediate basis as it excludes the most volatile and irrelevant components of the basket; i.e. food and energy. The government must ensure the effectiveness of price control measures through vigilant actions against hoarding, price gouging and malpractices.
Tanveer explained that despite the progressive and major hikes in the policy rates from 9.75 percent to 22 percent over a period 6 quarters in 2022 and 2023, general inflation remained stubbornly high and didn’t respond to the policy rate in Pakistan. We should start making our monetary and fiscal policies based on our own ground realities and hard facts, he added.
He said the interest rate should come down to 12 percent immediately to enable Pakistani exporters to some extent to compete in the regional and international export markets by reducing the cost of capital in a meaningful way. This step should be accompanied by the fulfilment of the government’s promise to rationalize electricity tariffs for industry; and, renegotiate independent power producers’ (IPPs) agreements, he stressed.
