A former advisor to Prime Minister on finance, Dr Salman Shah, has said that State Bank's statement regarding defence spending is misleading, as defence expenditure is at a reasonable level. He said that SBP admitted that the economy was slowing down while large scale manufacturing growth was in negative zone, and trade in services growth had slowed down, and in this situation it is not possible to achieve 2.5 to 3.5 GDP growth rate.
Talking to Business Recorder here on Tuesday, he said that the World Bank (WB) and other international financial institutions had forecast Pakistan's GDP rate lower than 2.5 percent in the current fiscal year. He said that it was not possible to achieve 3 percent GDP rate along with high level of interest rate.
He criticised the high interest rates and said that the Group-20 and international banks were focusing on creating employment opportunities, while the government of Pakistan had adopted a markedly opposite approach, which is not proving fruitful.
He said that unemployment was accelerating, and economy growth was slowing down due to high interest rates in Pakistan. He said that the SBP was hopeful that agriculture sector would strengthen, and it was depending on higher wheat production for its growth estimates. But if the wheat production does not reach its target, as per official estimates, then the GDP rate would be around 2 to 2.5 percent.
"Due to global recession, almost all developed and emerging countries are slashing interest rates to revive their sagging economies and are offering many stimulation packages, while SBP has still maintained the 15 percent interest rate, which has had a crippling effect on industry", he added.
He said that the SBP should bring down interest rate to single-digit level so that businessmen could be facilitated to give a boost to economic activity by availing easy credit.
Well known economist Qaiser Bengali termed the SBP report as very accurate, saying that it would help the economic managers to find solution to financial crisis. He said that the SBP report depicts the real picture of the country's economy, which will help planners and policy makers to resolve the challenges confronted by the country.
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