Lahore: The Pakistan Industrial & Traders Associations Front (PIAF) has rejected the State Bank’s decision of increasing its policy rate by 50 basis points to 6.5%, reaching a level of three-year high.
PIAF Chairman Irfan Iqbal Sheikh, while issuing a statement alongwith senior vice chairman Tanveer Ahmed Sufi and vice chairman Shahzeb Akram, said the business community was expecting a reduction in interest rate as it was a consensus recommendation by economists that monetary policy should be eased to control adverse effects of recession.
He said the upward revision in lending rate would translate in multiplying high inflation and increasing the cost of production that would further paralyse the already numb industries. He said the SBP move would hit hard the overall economy as the availability of money to the business community had been made more expensive.
The decision would neither help curtail fiscal deficit nor control inflation as it had not served the purpose in the past rather it would create troubles for the investors.
He said the tight monetary policy was already hampering the industrial production hurting exports, increasing joblessness besides pushing up the cost of doing business.
He said in the name of reducing inflation the State Bank policy measures will generate more inflation. As a consequence of these steps inflation will not decrease but it will increase further, he added.
“In the name of reducing inflation the state bank policy measures will generate more inflation. As a consequences of these steps inflation will not decrease but it will increase further” Chairman quoted. He said that the major cause of rising inflation was increase in the prices of industrial inputs and shortage of essential items of daily use.
All these are inelastic products and monetary policy cannot control their prices. He pointed out that the SBP was preparing monetary policy without studying the nature of inflation that is not demand-pull, which can be controlled through tight monetary policy.
