Mr. Atif Ikram Sheikh, President of FPCCI, has informed that Pakistan’s business, industry, and trade community is disappointed with the monetary policy as it continues to be based on a heavy premium vis-à-vis core inflation. While we appreciate the rate cut by 200 bps or 2 percent, this is too little, too late in the context of price data—domestically and internationally, he added.
Mr. Atif Ikram Sheikh pointed out that core inflation clocked at 9.6 percent in Pakistan during August 2024, as per the government’s own available data through the Pakistan Bureau of Statistics (PBS). Therefore, the real interest rate is still 790+ bps even after this rate cut, compared to the core inflation, which is anti-business and anti-growth, to say the least, he added.
Mr Atif Ikram Sheikh explained that, according to market estimates, core inflation would be around 8.0 per cent in September 2024. In addition, international oil prices have fallen to a three-year low at less than $70 per barrel this week. The authorities had all the information they needed to announce a substantive rate cut, but they still maintained their regressive, counterproductive, and contractionary monetary policy practices, he added.
Mr. Atif Ikram Sheikh reiterated his stance that Pakistan’s cost of doing business, ease of doing business, and access to finance are the lowest among its competitors in the export markets. Fortunately, the sizeable downward trend has been continuing for the past many months, and he added that the only viable solution to get back on the economic growth trajectory is to support industry and exports.
FPCCI President made it clear that the interest rate should come down to 12 per cent immediately to enable Pakistani exporters to some extent to compete in the regional and international export markets by meaningfully reducing the cost of capital. He added that 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) power purchase agreements (PPAs).
Mr. Atif Ikram Sheikh, as President FPCCI, the apex trade & industry body of Pakistan, has questioned the approach of the government, on behalf of the entire business, industry and trade community of Pakistan, in bringing transparency & consultation in the economic policymaking and, has reiterated his stance that the government should provide answers to the two sets of questions for businesses to plan their years: (i) what are the measures that are being undertaken to obtain the new IMF program and how would they affect cost of doing business in Pakistan (ii) what steps will be taken after the signing of IMF program to stabilize the economy and how & when the government plans to take the business community into confidence on these measures.
Mr. S. M. Tanveer, patron-in-chief of UBG, said that SBP should focus on core inflation rather than general inflation immediately as it excludes the basket’s most volatile and irrelevant components, i.e., food and energy. The government must ensure the effectiveness of price control measures through vigilant actions against hoarding, price gouging and malpractices.
Mr S. M. Tanveer, patron-in-chief of UBG, explained that despite the progressive and major hikes in the policy rates from 9.75 per cent to 22 per cent over six 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.
