Govt under fire for ‘wrong economic policies’ 

Govt under fire for ‘wrong economic policies’ 

By: News Desk      Published: 07:41 PM, 6 Dec, 2021
Govt under fire for ‘wrong economic policies’ 
FPCCI’s Businessmen Panel Chairman Mian Anjum Nisar.–File photo

The Federation of Pakistan Chambers of Commerce and Industry's Businessmen Panel (BMP) has warned the central bank of any aggressive jump in the key policy rate in the upcoming Monetary Policy, as the recent stock market crash is the outcome of government’s ‘wrong economic policies’.

The stock market investors were stuck in a selling frenzy over economic fallout from the country’s record trade deficit and the fear of another discount rate hike, observed FPCCI’s Businessmen Panel Chairman Mian Anjum Nisar.

Demanding competitive interest rate at regional countries’ level, he said that the SBP’s stance of keeping monetary policy rate at 7% was already high compared to the mark-up rate of China, India and Bangladesh. Yet, the central bank jacked up the key policy rate by another 150 basis points to 8.75% in last monetary policy, leading to the crash of stock market, which will remain bearish until announcement of next Policy announcement.

The hike in the interest rate by 125 basis points by the State Bank during the auction of T-bills has increased investors' problems. In addition, there is a fear of further hike in the interest rate in the monetary policy announcement on 14th of Dec because of which there is constantly selling pressure in the market, he added. He said that expectation of further monetary tightening and an expected all-time high current account deficit had sparked panic selling across the board, leading to the capital market’s massive tragedy.

The BMP Chairman asked the SBP governor to fulfill his commitment of maintaining accommodative monetary stance in the near and long-term to support the rare recovery amid uncertain Omicron Coronavirus Variant worries and challenges. He stressed the need for reduction in discount rate, arguing that low key policy rate is essential to make Pakistani exporting sector as well as the local industry competitive.

Mian Anjum Nisar said that achievements in exports and stabilization of the economy through the monetary policy measures now require to sustain again by extending reduction in the policy rates so that the debt liability of the business sector is compensated through lower mark-up rate.

BMP Presidential candidate for the FPCCI elections Irfan Iqbal Sheikh observed that most economic activity data and indicators of consumer and business sentiments have shown continued improvement. The trade and industry need continued support from the government in the form of lower interest rate amidst such external shocks, he suggested. He said that the manufacturing recovery is also becoming more broad-based, with 12 out of 15 sub-sectors registering positive growth and employment beginning to recover.

Irfan Iqbal Sheikh, the former LCCI president, also demanded the immediate reduction in electricity tariff especially for SMEs as a first step towards cut in production cost while the second and vital step toward this direction would be bringing discount rate to the regional level with a view to provide level-playing field especially to the export industry. The decision would have the same importance for the domestic industry too, as it has also been facing tough competition of cheaper imported merchandize in the country following FTAs with several countries, he added. While appreciating the central bank’s role in sustaining economic growth through supporting trade and industry, he said that reduction in interest rate would be vital relief to the business community.

Mian Anjum Nisar said that after the Corona devastation, Pakistan should take advantage of those export orders canceled by the other regional countries. For this, the government will have to reduce production cost of the industries to avail this offer by the international buyers.

FPCCI ex-president, said that the central bank should announce an initiative related to loans for small and medium enterprises (SMEs), as the SME sector has to show collateral to banks, which are always reluctant to offer them concessional credit.

Anjum Nisar said the stock exchange has not crashed rather the government's economic steps it had taken had crashed. The stock exchange falling by over 2,000 points is a sign of investor's distrust in the government's economic policies, he said.

The BMP again warns that the trade deficit and further increase in interest rates will kill the economy, he said and added that this is the result of taking foreign loans and the continuous depreciation of rupee, calling for putting an end to this destruction.