Policy of containing inflation through raising interest rates has failed. Banks in US and EU failed due to soaring interest rates, lessons be learned. Endless holidays on Eid should be reconsidered.

(April 17-2023)

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 Monday said the policy of increasing interest rate to reduce inflation has failed, so the interest rate should not be increased further. 

Rather, other methods should be used to contain inflation and provide some relief to the masses. 

Mian Zahid Hussain said that an increase in the interest rates was followed by the failure of banks in the US and EU which damaged their economy, therefore instead of repeating the experiences of these countries, lessons should be learned from them.

Talking to the business community, the veteran business leader said that frequent increase in interest rate in Pakistan is not serving any purpose but to disturb the business community and the public, and it is leading to bank defaults.

The causes of inflation in Pakistan are the continuous increase in the value of the dollar more than the demand for commodities, continuous decrease in the value of the rupee, and holding containers loaded with goods worth more than five billion dollars at the ports, which leads to the lack of essential commodities and raw materials in the country.

Lack of control over prices and hoarding mafia exploits are also reasons behind the unprecedented inflation. 

Mian Zahid Hussain said that in developed countries, the business community and the people take the most loans from banks, so the increase in the interest rate reduces the demand and inflation. 

But he observed that the main customer of banks in Pakistan is the government itself, and no government cares what the interest rate is.

He questioned how inflation will be controlled by increasing the interest rate when the government has to borrow indiscriminately anyway. 

The business leader further said that approximately 50 million people in Pakistan receive about 12 trillion rupees annually through remittances and hundi, which increases the demand for goods and services, which is not affected by the interest rate. 

The government continuously strives to increase exports and remittances and introduce cheap credit schemes to increase productivity, increasing demand.

He noted that in Pakistan, 60% of the economy is undocumented, due to which people have an extra four trillion rupees available every year, and even these people are not affected by the increase in interest rates because they do business in cash. 

He demanded that the endless holidays on Eid should be revised and the holiday on the 25th should be abolished and also 29th should be declared as a working day.