Interest rate hiked by 25 bps; impacts will be drawn on investment, industry & CoDB. Inflation reached to 7.2 pc; highest in 4 years.


(February 04, 2019)

President Pakistan Businessmen and Intellectuals Forum (PBIF), President All Karachi Industrial Alliance (AKIA), Senior Vice Chairman of the Businessmen Panel of FPCCI and former provincial minister, Mian Zahid Hussain on Monday said that State Bank has increased policy rate by 25 base points to 10.25 pc effective from February 2019 which will draw psychologically negative impacts on investment and industry while inflation and cost of doing business will further increased. Inflation attained the highest level of 7.2 in the last four years, despite initial estimation of 5.2 percent. Given to expected price rise in basic commodities inflation can further rise by 3 – 4 percent.

The Veteran Business Leader while talking to the business community said that with constant increase in policy rate, economic activities in the country are getting contracted. Increasing inflation due to several financial measures is directly affecting purchasing power of general public. SBP estimation for GDP growth of the current year is 4 percent which is far below the targeted growth rate of 6.2 percent. GDP growth rate can be declined to 3 percent given to the current economic indicators.

The Former Minister said that effect of marginal increase in exports has leveled by increase in imports of production sector including metals, machinery, transport and petroleum and rise in the international price of petroleum products. Trade deficit cannot be sustained in the short run therefore, instant policies and measures are vital to increase exports in order to counter the increasing trade deficit.

Mian Zahid Hussain said that government needs to form both short and long term policies to control the increasing inflation, reduce the cost of doing business and counter trade deficit. Policy rate is increased with the aim to control inflation but other factors are being ignored. Foreign investment will be discouraged due to increased policy rate, which is vital to ease pressure on foreign reserves. However, remittances have been increased by 10 percent in the first half of FY 2019 while exports have only increased by 2 percent but due to increase in energy sector imports current account deficit is accounted for $ 8 billion, declined by 4 percent as compared to previous year.

Mian Zahid Hussain said that a current economic crisis is adversely affecting industrial production and performance of large scale manufacturing while industrial exports are decreasing. Encouraging foreign investment is need of time; to get Pakistan out of current crisis it is important to take m of measures for growth of agriculture, trade and industry.