Chairman of National Business Group Pakistan, President Pakistan Businessmen and Intellectuals Forum, and All Karachi Industrial Alliance, and Former Provincial Minister Mian Zahid Hussain on Wednesday said the second hike in the interest rates by the central bank in 25 days is worrisome.

The move will increase the cost of doing business and hit the economic activities as the bank has increased interest rates by one percent, he said.

Mian Zahid Hussain said that the hike may prove insufficient and the State Bank may increase interest rates again in January.

Talking to the business community, the veteran business leader said that policy rates have been pushed to 9.75 percent in a bid to contain inflation and current account deficit and improve balance of payments.

One of the purposes of raising interest rates is to curb rising imports, which, if achieved, will help the rupee recover to some extent, he added.

He said that in view of falling crude oil prices in the international market, it would have been better for industry and trade if interest rates had not been raised.

The decision of the SBP will shrink the economy and employment will decline but it may not reduce inflation and the current account deficit which is set to exceed the estimates of the SBP.

Interest rates are likely to rise again in January again following the mini-budget as the continuous hike in prices of electricity, petroleum products, ghee, flour, milk and other commodities will further increase inflation while house rents are also rising which will also add to the hardships of the tenants.

The central bank believes that in the last six months of 2022, the current account deficit, trade deficit and inflation will be reduced, which could be a miscalculation.

He noted that the state of the country’s economy is not such that it can be improved by increasing exports and remittances therefore the government will have to cut several hundred billion rupees in developmental projects while also reducing its expenditure which is a difficult option for rulers.

He said that even if expenses are reduced, the government will have to borrow billions of dollars from the international market in order to avoid bankruptcy.

The country will have to pay more interest for borrowing and servicing debts after the rate hike, he said.