(April 29, 2022)
Chairman of National Business Group Pakistan, President Pakistan Businessmen and Intellectuals Forum, and All Karachi Industrial Alliance and Former Provincial Minister Mian Zahid Hussain on Friday said the possibility of a further increase in interest rates by the central bank has disturbed the business community.
Further increases in interest rates will affect businesses while inflation will rise, so before taking such a step, its implications should be considered as it will harm the economy, he said.
Mian Zahid Hussain said that raising interest rates would increase the cost of debt servicing, the private sector would feel the pain, the cost of doing business would increase, many businesses would close, jobs would be reduced, exports would be affected and investment would be affected.
Talking to the business community, the veteran business leader said that the move will hit the growth rate which is already unsatisfactory.
He said that a continuous decline in the foreign exchange reserves of the central bank for several months, continuity of unnecessary imports, sharp rise in prices of oil, gas and other commodities in the international market and the IMF’s demand for the elimination of oil subsidies have made the situation worrisome.
The increase in interest on loans given to the commercial banks by the government is adding to the problems.
Mian Zahid Hussain said that commercial banks are reportedly in agreement to get more profit on loans, which merits an investigation.
The previous government had estimated that the fiscal deficit would be up to Rs3.9 trillion but unnecessary and wasteful expenditure has aggravated the situation and now Finance Minister Miftah Ismail says that the fiscal deficit could increase to Rs6.4 trillion which would be equal to ten percent of the GDP.
In such a situation, when the government has only a few hundred rupees left and the affairs are getting out of hand, it would be better to take foreign loans instead of borrowing from local sources and this would also reduce the difficulties in making the upcoming budget.
There is a possibility for economic cooperation by the IMF, Saudi Arabia and China in view of the good governance of Mian Shahbaz Sharif. If that happened, then it would be very good for Pakistan.
India and Bangladesh do not need IMF loans but Pakistan cannot function without the help of international institutions because its economic model is flawed. At present, there is a need to plan a workable strategy to increase foreign exchange reserves, he said.