KARACHI: Atif Ikram Sheikh, President FPCCI, has apprised that the business, industry and trade community of Pakistan is disappointed with the monetary policy as it continues to be based on a heavy premium vis-à-vis core inflation.
Currently, inflation as per government’s own statistics, stood at 6.9 percent in September 2024; but, the policy rate is 17.5 percent, which reflects a premium of 1060 basis points vis-à-vis core inflation, he added.
He continued that, after deliberations across all industries and sectors, FPCCI demands an immediate, single-stroke rate cut of 500 basis points, in the upcoming Monetary Policy Committee (MPC) meeting on Monday, to rationalize the monetary policy; and, align it to the vision of Special Investment Facilitation Council (SIFC) and the Prime Minister’s vision for economic growth and exports. It is pertinent to note that the core inflation is expected to be close to 7 percent for the month of October 2024, he added.
Atif Ikram Sheikh explained that the international oil prices are also expected to remain low and Saudi Arabia is expected to cut crude prices for Asia in December; whereas, oil is one of the major contributing factors in creating ripple effect in inflationary pressures in Pakistan.
The authorities in Pakistan now have all prerequisites to announce a substantive rate cut; and do not hold onto their regressive, counterproductive and contractionary monetary policy practices, he added.
Sheikh reiterated the apex body’s stance that cost of doing business; ease of doing business and access to finance in Pakistan is at the lowest as compared to all its competitors in the export markets. Fortunately, the decisive downward trend in inflationary pressures has been continuing for the past many months; and, the only viable solution to get back on economic growth trajectory is to support industry and exports, he added.
Saquib Fayyaz Magoon, SVP FPCCI, proposed that the interest rate should come down to 12.5 percent immediately to enable Pakistani exporters to some extent to compete in the regional and international export markets through reducing the cost of capital in a meaningful way. This step should be accompanied by the fulfilment of government’s promise to rationalize electricity tariff for industry; and, the government should renegotiate all Independent Power Producers (IPPs) Power Purchase Agreements (PPAs) on take-and-pay basis; which means that the industry and consumers will be set free from paying capacity charges in their electricity bills, he added.
FPCCI, the apex trade & industry body of Pakistan, has persistently questioned the approach of government, on behalf of the entire business, industry and trade community of Pakistan, in bringing transparency & consultation in the economic policymaking; and, has reiterated its stance that the government should provide answers to the two sets of questions for businesses to plan their investments, (i) what are the measures that are being undertaken to stay on course the new IMF programme and how would they affect cost of doing business in Pakistan (ii) what steps will be taken to put Pakistan back on a growth trajectory and how & when the government plans to take the business community into confidence on these measures.
Copyright Business Recorder, 2024
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