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LAHORE, Jun 10 (APP):Federation of Pakistan Chamber of Commerce and Industry (FPCCI) President Atif Ikram Sheikh has demanded further cut in policy rate.
In media statement issued here Monday, he cited that the policy rate cut announced today is too little and too late as the business, industry and trade community was expecting a substantive cut in the key policy rate of the State Bank of Pakistan vis-à-vis decline in core inflation.
Atif Ikram mentioned that core inflation has come down to 11.8 percent in May 2024, which is the lowest in the 30 months period, asserting that interest rate should come down to 15 percent to enable Pakistani exporters compete in the regional and international export markets through reducing the cost of capital substantially. This step should be accompanied with the fulfillment of government’s promise to rationalize electricity tariff for the industry.
The FPCCI President argued that consumer prices are categorically showing a declining trend as these fell by 3.2 percent in May 2024 compared to a decrease of 0.4 percent in April 2024 as per Pakistan Bureau of Statistics (PBS). It is now overdue to provide respite to the business community in their access to finance from commercial banks through effectively and appropriately reducing the key policy rate, he added.
He, on behalf of the entire business, industry and trade community of Pakistan, called for bringing transparency & consultation in the economic policy making.
In order to promote price stability, the FPPCI chief emphasized that SBP needed to break the inflation rate into cost-pushed and demand-pulled. He also recommended that the SBP should target core inflation; non-food non-energy (NFNE); for operational guidance. The SBP needed to strip out volatile changes in particular prices to distinguish inflation from temporary fluctuations in inflation. Efforts needed to be made to control price manipulation and hoardings in liaison with the respective federal and provincial government departments. An active and efficient Competitive Commission of Pakistan (CCP) and effective price control mechanisms also need to play their due role.
FPCCI Senior Vice President Saquib Fayyaz Magoon said that SBP should focus on core inflation rather than general inflation on an immediate basis as these exclude the most volatile components of the basket. The government should ensure the effectiveness of price control measures through vigilant actions against hoarding and malpractices.
Magoon explained that despite the progressive and major hikes in the policy rates from 9.75 percent to 22 percent over a period six quarters in 2022 and 2023, general inflation remained stubbornly-high and didn’t respond to the policy rate.
He stressed that despite the successful completion of IMF Stand-by Agreement (IMF-SBA) and 22 percent policy rate, Pakistan remains overwhelmed with issues dwindling exports and economic instability. This phenomenon well-establishes the fact that the government needs to employ other policy tools to tame the economic volatility.