Federation of Pakistan Chambers of Commerce and Industry President Ahmed Chawla, while expressing disappointment over the State Bank of Pakistan decision to keep the base rate unchanged at 12.5 percent during January to March 2010, has termed the three-month Monetary Policy as anti-investment.
"We believe the SBP will fail to arrest rising inflation as it ignores the demands of industrial sector," he said this at a press conference on "SBP's Anti Investment Monitory Policy" organised by FPCCI at Federation House on Thursday. Expressing disappointment at the decision of the SBP, he said the bank's Monetary Policy Statement for the period continues to ignore the industry's interests.
The SBP's own calculations show that the growth of the Large Scale Manufacturing (LSM) sector continues to remain stagnant in the current year after falling by at least 20 percent during 2009, he added. Moreover, he said investment growth in the manufacturing sector is constrained by the major decline in capital goods imports during the first half of FY10. During last six months, exports have also declined by eight percent and Pakistani businessmen are losing out on both domestic and international markets.
The FPCCI President said the SBP's Monetary Policy can have little impact on Consumer Price Index (CPI) inflation. "Inflation in Pakistan is a supply side phenomenon, which is caused by rising prices of energy, industrial raw material, and especially financial costs," he added.
Besides, he said by maintaining a high interest rate regime, the State Bank was stopping the investment growth, causing a drastic reduction in the consumption of commodities. "The Monetary Policy is also ineffective because changes in the discount rate and interbank rates do not lead to corresponding changes in bank lending rates," he said, adding that these remain exorbitantly high.
He said a high interest rate policy was in fact exacerbating inflationary pressure by pushing up cost of production. Moreover, "a tight high interest Monetary Policy depresses consumption demand and squeezes profitability and increases poverty and hence maldistribution of income," he said.
The FPCCI President also called for effective representation of industry's interests on the SBP Board of Governors. He said FPCCI should formally nominate two business sector representatives to the Board of Directors of the State Bank. To a question, he said though the policymakers listen to FPCCI while accepting the suggestions/views but the decision comes against the expectation. "We do not know who the secret forces are which formulate the policy against the interests of the country," he added.
Talking about the IMF dictation, he said the government should avoid getting more loans from the international institutions, which mostly protect their own interests. The stabilisation programme of the IMF, which the government has accepted without any condition, was discouraging the domestic consumption with slowing the space of productivity, causing increase in poverty, he added.
Dr Mumtaz Ali Sheikh, Vice President FPCCI said the IMF was not an international organisation instead an intergovernmental organisation, protecting the interests of member countries. "Why does the IMF not dictate the United States which is indebted trillion of dollars, as it does with the Third World countries," he said adding that the government should seriously think on the darker side of the external loans which have multidimensional agendas behind. Zakariya Usman, Mansha Churra, Vice Presidents of FPCCI and other members were also present.
Comments
Comments are closed.