Former Vice President of FPCCI Atif Ikram Sheikh on Sunday said the demand of the IMF to hike interest rates should be completed on time as it will annoy the lender. IMF believes the interest rate hike is necessary for containing inflation; however, it will also significantly increase the debt burden, he said.

Atif Ikram Sheikh who has also served as President of ICCI and Chairman of PVMA said in a statement issued here today that IMF has asked Pakistan and some other countries to further increase interest rates to stabilise inflation.

He added that the World Economic Outlook had projected a 27.1 percent average inflation rate for the current fiscal year, while the forecast is 21.9 percent for the next fiscal year.

He said that SBP has already increased the interest rates to the highest-ever level of 21 percent which has failed to contain inflation. Still, it caused a significant surge in the government’s debt servicing cost, now estimated at around Rs5.3 trillion as against the budgeted figure of Rs3.95 trillion.

Since the start of the IMF programme in July 2019, Pakistan has doubled its policy rates, but it has yet to do much to improve the situation.

IMF has projected our foreign exchange reserves at $11.7 billion, while the growth rate is expected to slow materially from 6 percent in 2022 to 0.5 percent this year. Growth in the region will accelerate to 4.4 percent in 2024, but it will hover around 3.5 percent in Pakistan.

The business leader said that the IMF hoped that Pakistan is expected to start meaningful fiscal consolidation, including subsidy reforms which will compromise growth.

The global lender thinks that Pakistan will miss the fiscal and debt reduction targets of this fiscal year and the situation will become worse in the next fiscal year with a budget deficit peaking at 8.3 percent, he said.