FPCCI President Malik Zubair Ahmed on Wednesday said that upward revision in the interest rates would prove a disaster for the grappling economy and would damage the shabby investment climate as it would only benefit the lenders.
The business community expected that the State Bank was bracing for an increase in the policy rate amid continued erosion in value of local currency against dollar on the behest of IMF, he said.
Private sector borrowing remained still very low as banks preferred lending to the government and a hike in the key policy rate would amount to punish the masses – the government as well as the private sector – as they will have to pay more interest on borrowings.
Malik Zubair Ahmed said the move would push up the cost of living, the cost of doing business leading and rate of defaults and unemployment to increase the nervousness. Private companies will find it tough to discharge obligations and raise fresh funds, he added.
He warned that hike in power prices, POL prices and expected surge in interest rate in absence of any structural reforms may hit the sentiments which have turned positive after the May 11 elections.
Malik Zubair Ahmed said increasing interest rates in past had not helped the government reduce imports of oil, food, raw material and essentials while it had reduced growth and savings, triggered unemployment and made imports costly.
Moreover, he said, it had hit investors’ confidence and eroded the ability of the government and private sector to spend on development which had stalled national progress.
He said the government should stop blaming past rulers for poor performance and take positive steps to minimise the negative impact of hike in power and POL prices and weakness of rupee which should not be intensified with an interest rate hike.
The FPCCI chief said that Pakistan needed a clear roadmap for a sustained turnaround backed by ceiling on central bank lending to the government, increased revenue collection, reduced expenditure and abolishing unnecessary exemptions as well as subsidies to breathe a new life into the limping economy. Increasing interest rates have not prevented the flight of US dollars from Pakistan in the past.
Interest rate hike disaster for economy: FPCCI chief
