By Abdul Rafay Siddiqui
KARACHI: Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has expressed strong discontent with the current monetary policy, arguing that recent measures fall short of addressing the core economic challenges facing Pakistan. Sheikh acknowledged the recent 200 basis points (bps) or 2 percent reduction in interest rates but criticized it as inadequate. He pointed out that core inflation in Pakistan reached 9.6 percent in August 2024, according to data from the Pakistan Bureau of Statistics (PBS).
Despite the rate cut, the real interest rate remains significantly high at over 790 bps relative to core inflation, which he described as “anti-business” and detrimental to economic growth. Sheikh highlighted that core inflation is projected to be around 8.0 percent for September 2024. Coupled with the recent decline in international oil prices to a three-year low of less than $70 per barrel, he argued that the authorities missed an opportunity to implement a more substantial rate cut. He criticized the continued reliance on “regressive, counterproductive, and contractionary monetary policy practices.”
S. M. Tanveer, Patron-in-Chief of the United Business Group (UBG), supported Sheikh’s critique, suggesting that the State Bank of Pakistan (SBP) should focus more on core inflation, which excludes volatile components like food and energy. He called for effective price control measures and vigilant actions against hoarding and price gouging. Tanveer also highlighted that despite significant hikes in policy rates from 9.75 percent to 22 percent between 2022 and 2023, general inflation remained persistently high, indicating a disconnect between policy rates and economic realities. He urged the need for monetary and fiscal policies tailored to Pakistan’s specific conditions.
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