The country’s central bank has further hiked key policy rate by 100 basis points to a record 21 percent with a view to reining in unbridled inflation.
It is however interesting to note that the previous hikes in interest rates by the central bank had not tamed or contained the rising inflation at all.
The central bank’s strategy in relation to the price hike-inflation challenge does give birth to a pertinent question: Is it only aimed at further reducing the credit or lending space for the private sector in the country? It is quite obvious that no business can stay afloat, let alone flourish, with dignity by borrowing money at such high interest rates.
In my view, the central bank seems to have gone too far by rising interest rates in quick succession. Be that as it may, that the country’s economy is in tatters is a fact. That the present economic situation is unprecedented in the history of the country is also a fact.
The country is on the verge of a sovereign default. But there are other reports, however unfortunate, that the country has already defaulted on debt. The situation is already bad and government’s inaction would make it even worse.
The situation clearly explains government procrastination resulting from growing political uncertainty. Unfortunately, however, this government will procrastinate for as long as possible.
Shahid Randhawa (Rawalpindi)
Copyright Business Recorder, 2023
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