PAKISTAN has one of the highest markup rates in the world, a study that appeared in this paper yesterday shows. And, correspondingly, the country has one of the highest rates of inflation in the world as well. Our central bankers are in a bit of a fix in how to go about the problem. After the loose monetary policy that was recommended to the SBP by the Finance Ministry and the consumption-led growth that the economy experienced, there was a large measure of inflation in the country. To counter this inflation, which soon began to outstrip the bit of growth that the economy experienced, the then SBP Governor Dr Ishrat Hussein started tightening the monetary policy. This was continued throughout his term and his successor, Dr Shamshad Akhtar's, as well. But this tightening, which is done through several tools including the benchmarks that are in the direct control of the SBP, have severe inflationary pressures. It's a catch-22: we have to tighten the monetary policy to counter inflation; but tightening it by raising mark-up and interest rates raise the costs of doing business in the country, which eventually has inflationary pressures. Furthermore, to solve the supply-side inadequacies that are leading to inflation in the country, we need more credit provision to productive sectors. We cannot have that with such high interest rates. Even if we operate on surgical precision i.e. maintain high interest rates for consumption ends and low ones for productive ones, there is still going to be a measure of inflation in the country. But it still might be our best bet.