The Islamabad Chamber of Commerce & Industry has shown concerns over 25 basis points increase in the benchmark interest rate by State Bank of Pakistan as it would enhance credit cost for private sector, give further rise to inflation and affect the growth of economy.

Ahmed Hassan Moughal, President, Islamabad Chamber of Commerce & Industry said that SBP has made sixth consecutive increase in the policy rate taking it to peak level which was not in the interest of business activities. He said that SBP policy rate was 6 percent in January 2018 which has now gone up to 10.5 percent showing a cumulative increase of 4.5 percent in one year that would take a toll on business activities.

Ahmed Hassan Moughal said that economy of Pakistan was confronted with many challenges and the best option to revive the economy was to provide cheap credit to private sector for expansion and growth of business ventures. He said that perhaps government was trying to fulfill the conditions of IMF by enhancing policy rate. However, he cautioned that IMF conditions have never benefited our people or the economy. He stressed that government should follow an easy monetary policy to crowed in private sector for banking credit. He emphasized that before taking such harsh measures, government should take private sector on board to formulate a joint strategy for steering the economy out of troubled waters.

Rafat Farid, Senior Vice President, Islamabad Chamber of Commerce & Industry said that further hike in interest rate would discourage investors from considering Pakistan for investment, especially at a time when Pakistan was badly looking for more FDI. He said that Pakistan needed quick revival of business and industrial activities to improve the health of the economy, but 25 bps increase in interest rate would translate into further hurdles in promoting business activities.

He said SBP itself has acknowledged that challenges to Pakistan’s economy continued to persist due to rising fiscal and current account deficits. He stressed that government should follow soft monetary policy to facilitate the availability of easy credit facility for business enterprises. He said low interest rate regime would bring many benefits as it would help in promoting business ventures, creating new jobs, enhancing exports and tax revenue and paving way for early revival of economy.