The Pakistan Industrial & Traders Associations Front (PIAF) has appealed the government to review its tight monetary policy stance as it will hamper the production and thwart the economic growth of the country.
PIAF senior vice chairman Nasir Hameed and vice chairman Javed Siddiqi, in a joint statement, said that the growth in large-scale manufacturing industries is already nominal in the first quarter of current fiscal year, as the industries were poised to face the impact of high input prices and shortage of gas in winter, while further hike in markup rate is another threat for them.
During the July-Sept period of fiscal year 2021-22, the LSM sector output grew just by 5.2%, while on a month-on-month basis, the LSM sector contracted by less than 1% in Sept over Aug. The year-on-year growth rate in Sept was only 1.2% over the same month of previous year. The low base effect has so far been driving the growth in large industries as the index had dropped to the low level of 86.2 in April last year from the peak of 160 before Covid-19 struck Pakistan. The index still remains below the pre-Covid level as it stood at 139.8 in Sept. Since large industries contribute heavily to revenue collection and job creation, any change in key policy rate will affect negatively on the growth of industry, they added.
Nasir Hameed said high interest rates in low growth environment will create bad debts in the private sector squeezing fiscal space for development. He said the current high monetary policy will depress the domestic demand and retard the economic progress. He said the current monetary policy will also stifle capital formation both in the public and the private sectors. He said despite nominal growth, inflationary pressures are again building up in the economy while steep depreciation of the rupee is pushing up prices of imported industrial inputs, which will further cripple industrial activities.
