LAHORE
Renowned economist Faiz Ul Haq has said that International Monetary Fund (IMF) conditionalities will push policy rate even further – and, the same has nothing to do with the real-world implication of interest rate hikes vis-a-vis Pakistan.
Faiz Ul Haq added that in a country where only 7 percent of its business community takes loans from banking channels, raising interest rates is no more than a fallacy.
We have come a long way on a burgeoning path of 7 percent to 16 percent policy rate progression over the course of the last one and a half years; however, we have only witnessed a persistent and no-end-in-sight increase in headline inflation and other indices, he added.
Senior Economist Faiz Ul Haq said that we are living in an almost quarter a century’s highest policy rate regime in the country despite witnessing one of the most devastating floods in recent human history – not only in Pakistan.
I am startled at the fact that the world is willingly testifying on our economic losses and our damages are quantifiable; and yet, we have not been able to extract any concessions for our people from lenders, he added.
Faiz Ul Haq has elaborated the real reasons behind the unabated inflationary pressures as the triple whammy of diverse factors: (i) uncontrolled rise of dollar – far above the real effective exchange rate (REER), i.e. the only point where the finance minister seems to have stood his ground so far (ii) supply-side disruptions of essential & staple foods basket, hoarding & profiteering, maladministration & non-existent planning for food security, lack of oversight and floods-induced annihilation of the produce (iii) price gouging in the capital markets by commercial banks; admitted by consecutive finance ministers & administrations.
