Lahore: The All Pakistan Business Forum has flayed the State Bank of Pakistan for jacking the key interest rate by 50 basis points to 6.5% for the next two months on the excuse of dealing with emerging inflationary pressure in its Monetary Policy.
APBF president Ibrahim Qureshi said that this is the second surge in the rate since January 2018 when the central bank increased the then four-decade low rate of 5.75% to 6%. Cumulatively, it has revised up the rate by 75 basis points in the second half of current fiscal year 2018. The rate has now hit a three-year high of 6.5% and comes as Pakistan prepares.
He said the SBP had adopted a wrong way of dealing with inflation as 50 basis points increase in discount rate would jack up the cost of doing business that would ultimately hit the economic growth.
With weaknesses in private capital inflows continue to persist, the Central Bank should cut policy rates to spur growth, as cut would infuse confidence in the business community and propel economy which was hostage to the past policy of austerity. “The businessmen expecting the cut in interest rate, as the rate cut could help boost private sector growth.” He also complained that lending to private sector by the commercial banks during the current fiscal year has not picked up pace.
Some 10 years back, banks were providing 67 per cent credit to private sector which has fallen to just 32 per cent by 2017, he said. He added as per monetary policy statement January, banks provided total credit of Rs 225 billion to private sector during the first half of current financial year as compared to Rs 328 billion during the same period of last year which again shows banks’ declining supporting role to private sector.
Ibrahim Qureshi suggested the government to observe restraint while getting loans from commercial banks and improve governance to ensure 5.4 percent growth target which has not been achieved so far.
