Acting President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Farooq Dadabhoy, has expressed grave concern over monetary policy statement of State Bank of Pakistan Governor. In a release here on Wednesday, he said this statement was hasty, adding that on Tuesday a team of the Federation of Pakistan Chambers of Commerce and Industry had attended a meeting at SBP, and next meeting was scheduled to be held on Thursday.
He said that the SBP has re-emphasised its stance to increase 200 basis points increase in the rate of interest, which would increase the cost of production, and it would definitely be transferred to consumers, which would ultimately add to inflationary pressure, and subsequently hamper exports targets.
"Empirically, during recession, expansionary monetary policy has to be adopted. Almost all economies of the world have reduced interest rate to ease the economy of the country, but State Bank of Pakistan is continuously using the tool of tight monetary policy in order to reduce inflation," he added.
SBP misperceives the nature of inflation. Inflation in Pakistan is not demand-pull, which can be easily tamed through tight monetary policy. The nature of inflation in Pakistan is cost-push.
Farooq said that business community had already proposed that the SBP should control utilisation of money and keep monitoring funds utilisation. He demanded that SBP should take steps to restore the businessmen's confidence and try to stop flight of capital from the country. The SBP should also exercise its control over government expenditure, he added.
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