KARACHI: Chairman of National Business Group Pakistan, President Pakistan Businessmen and Intellectuals Forum, Mian Zahid Hussain said that inflation in the country is decreasing after two long years.

He praised the government for reducing the inflation rate from 38 percent to 12 percent, stating that the State Bank must now lower interest rates by at least 10 percent.

Mian Zahid Hussain said that cutting interest rates is also important to provide some relief to the public and the business community, reduce unemployment, and increase exports.

Talking to the business community, the veteran business leader said that people have been suffering from a 22 percent interest rate since last year, which is seriously affecting businesses and promoting unemployment, while causing a lot of damage to the government.

This year’s interest payment will cost nine thousand billion rupees. A 10 percent reduction in interest rates will also halve the government’s interest payment burden.

According to the Bureau of Statistics, the consumer price index was 11.8 percent in May, which was 17.3 percent in April. Inflation has decreased by 8.62 percent compared to last month.

Last year, the inflation rate reached a record high of 38 percent. Keeping these figures in mind, the central bank should cut interest rates by 10 percent in its June 10 meeting so that economic conditions can improve, as unnecessary caution has hurt the economy.

Mian Zahid Hussain said that economic activity in the country has been sluggish for the past two years as the government has implemented some tough reforms under the bailout package of the International Monetary Fund to stabilize the declining economy, but many of the reforms have been politically motivated.

The ongoing neglect of important reforms and the slow progress on some are not producing the desired results. He said that experts expect the GDP growth rate to be 2 percent in the fiscal year ending in June, which was negative last year, while the government may keep the growth rate target for the new fiscal year at 3.5 percent.

This is because it expects an increase in economic activity, but if tax increases and energy prices continue to rise, the expected increase in economic activity will be difficult.

Mian Zahid Hussain said that the government has formally approached the IMF for a new long-term bailout package after completing the short-term programme to fully address the risk of bankruptcy.

Staff-level meetings have also been held and masses are awaiting for positive results.

The IMF, which previously insisted on a strict monetary policy to control inflation, has now relaxed its stance following the reduction in inflation. The government ought to capitalize on this opportunity.

Copyright Business Recorder, 2024