Karachi: Atif Ikram Sheikh, President FPCCI, has apprised that the business, industry and trade community of Pakistan 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 & internationally, he added.
Mr. Atif Ikram Sheikh pointed out that core inflation clocked at 9.6 percent in Pakistan during August 2024 as per government’s own available data through Pakistan Bureau of Statistics (PBS). Therefore, the real interest rate is still 790+ bps even after this rate cut as compared to the core inflation; which is anti-business and anti-growth; to say the least, he added.
Atif Ikram Sheikh explained that, as per market estimates, core inflation is going to be around 8.0 percent for the month of September 2024. On top of that, international oil prices have come down to a 3-year low at less than $70 per barrel this week. The authorities had all it takes to announce a substantive rate cut; but, they still held on to their regressive, counterproductive and contractionary monetary policy practices, he added.
Atif Ikram Sheikh reiterated his stance that 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. Fortunately, the sizeable downward trend has been continuing for the past many months; and, the only viable solution to get back on economic growth trajectory is to support industry and exports, he added.
FPCCI President made it clear that 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 through reducing the cost of capital in a meaningful way. This step should be accompanied by the fulfilment of government’s promise to rationalize electricity tariff for industry; and, renegotiating independent power producers (IPPs) power purchase agreements (PPAs), he added.
Mr. Atif Ikram Sheikh, as President FPCCI, the apex trade & industry body of Pakistan, has questioned the approach of 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 ahead: (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.
S. M. Tanveer, patron-in-chief UBG, said that 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.
Mr. S. M. Tanveer, patron-in-chief UBG, 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.
