Former caretaker federal minister Dr. Gohar Ejaz has challenged widely held economic assumptions about Pakistan’s boom-bust cycles, asserting that the financial shocks of 2018 and 2022 were fueled by surging international oil prices, not domestic policy missteps or low interest rates.
In a detailed post on social media platform X (formerly Twitter), Gohar described the popular narrative surrounding interest rate management as a “boom-bust fallacy.” He argued that the government’s belief that high domestic interest rates prevent economic crashes is flawed and wasteful.
Boom-Bust Fallacy
— Dr Gohar Ejaz (@Gohar_Ejaz1) June 27, 2025
Very interesting data for those who believe that the boom and bust cycles of 2018 and 2022 were caused by low interest rates. In both cases, it was the surge in international fuel prices—not consumer goods imports driven by low interest rates—that triggered the… pic.twitter.com/VTuetCzMHk
“In both cases, it was the surge in international fuel prices—not consumer goods imports driven by low interest rates—that triggered the bust,” he said.
According to Gohar, high interest rates are draining national resources, with PKR 3 trillion annually being spent on domestic debt servicing, which now consumes over 50% of the federal budget. He dismissed the notion that such spending prevents economic volatility.
Citing economic data, Gohar highlighted that in 2018, Pakistan’s trade deficit ballooned to $37 billion, driven by rising imports under CPEC projects, a drop in exports, and slowing remittances, not a result of consumer goods overconsumption from low interest rates.
Similarly, in 2021-22, Pakistan’s current account deficit hit $17.4 billion, largely due to massive vaccine imports during the COVID-19 pandemic and skyrocketing oil prices triggered by the Russia-Ukraine war. That same year, the Pakistani rupee depreciated by 30%, and the trade deficit soared to $47 billion, worsened by sluggish textile exports caused by high energy costs.
Gohar Ejaz’s critique points to a fundamental flaw in Pakistan’s monetary policy thinking: that controlling interest rates can prevent external shocks.
“It’s time to look at the data and rethink how we manage economic stability,” he urged, calling for a more evidence-based, global context-aware approach to policymaking.