President of Pakistan Businessmen and Intellectuals Forum (PBIF) Mian Zahid Hussain has apprehended that with constant increase in policy rate, economic activities in the country are getting contracted. He said State Bank has increased policy rate by 25 base points to 10.25 pc effective from February 2019 which would draw negative impacts on investment and industry psychologically while inflation and cost of doing business would further increase. He said inflation attained the highest level of 7.2 pc in the last four years, despite initial estimation of 5.2 percent. Given to expected price rise in basic commodities, inflation can further rise by 3 to 4 percent, he said, adding that rising inflation due to several financial measures was directly affecting purchasing power of general public.
PIBF president said that SBP estimation for GDP growth of the current year was 4 percent, far below the targeted growth rate of 6.2 percent. He said GDP growth rate could be declined to 3 percent given to the current economic indicators. He said effect of marginal increase in exports has levelled by increase in imports of production sector, including metals, machinery, transport and petroleum and hike in the international price of petroleum products. "Trade deficit cannot be sustained in the short run therefore, instant policies and measures are vital to increase exports in order to counter the increasing trade deficit," he said.
Mian Zahid suggested that government needs to form both short and long term policies to control the increasing inflation, reduce the cost of doing business and counter trade deficit. Policy rate is increased with the aim to control inflation but other factors are being ignored, he noted, adding that foreign investment would be discouraged due to increased policy rate, which was vital to ease pressure on foreign reserves. He noted tat remittances have seen 10 percent hike in the first half of FY 2019 while exports have only increased by 2 percent but due to increase in energy sector imports, current account deficit is accounted for $ 8 billion, declined by 4 percent as compared to previous year.
"Current economic crisis is adversely affecting industrial production and performance of large scale manufacturing while industrial exports are decreasing," he said, emphasising that encouraging foreign investment is need of time; to get Pakistan out of current crisis it is important to take measures for growth of agriculture, trade and industry.