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From the lead story of 30 September Business Recorder I have not been able to find a 'public good' through State Bank Policy Rate pegging-up.
Is it to squeeze the government, already burdened by commercial banks' intermittent debits pouring to the government in their books? Is it to trim the cost of doing business, to help generate employment opportunities or just to make heavier burgeoning pockets of the rentier class through increase in returns for the money held. Certainly the step would have a salutary effect on the rentier class as also on the apex bank's balance sheet, while everyone from home "merrily" looks at.
Government bank's objective should be to further national interest. To this end while effecting a change in its 'policy rate', it should spell out benefits accruing to the nation by its shifting positions. Of course, lesser draw down from the government coffers or reducing governmental cost of doing business should be its business in whatever shoes it be.
One would not really believe that through State Bank raising policy rates commercial banks can, in a big way, be motivated to up flows to the government. It should rather devote itself to advising the government to reduce its cost of doing business, finding new avenues for revenue, finding and suggesting projects which help the government financially. Certainly it has the muscles for.

Copyright Business Recorder, 2018

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