At first sight, a bit of tough love by the central bank. The State Bank of Pakistan has come out with the monetary policy for the first half of the current fiscal year on Tuesday. And not many are going to be happy with what it has to say. Bankers and industrialists are going to be perturbed at the higher rate of interest. The jump of 100 basis points to 13 percent from 12 is going to rankle. As it was, there was much resentment against that rate as it was. This attempt to suck excess liquidity out of the money market, loan seekers allege, will seriously curtail credit provision, hindering economic growth. True, State Bank will retort, but there's just too much inflation going around as well; so we'll just have to make do with the bit of credit that will be left. There are many ways to interpret all this, many sides one can take. First of all, State Bank is not at fault. As far as the nation's regulatory bodies go, it does a decent enough job of managing the banking sector and determining the money supply. There had been much pressure on the State Bank by the previous regime to inject a lot of cash in the markets. And then there were the reckless fiscal policies. The former the central bank could at least attempt to control, the latter was out of its ambit. The Bank had very little space to work with. It can argue it is using up what leverage that it has. But there are factors other than excess liquidity that lead to inflation. Simply hiking up the interest rates every time one gets antsy about price rises is not going to do the trick. As State Bank said itself, there are serious macroeconomic imbalances behind the state of affairs. An increasing aggregate demand without corrective measures on the supply side are jacking prices up. To this end, there is a dire need to increase the productive capacity of the economy. That, in this vicious cycle, is going to prove a little hard considering the recent constraint on credit provision because of higher interest rates. It is hoped State Bank has thoroughly done its math on whether or not the current interest rate is too stifling. The key feature of the monetary policy statement was to discourage the government against borrowing from it. In the last two days alone, the government borrowed Rs 55 billion rupees from it. And the practice doesn't show much sign of stopping. Finance Minister Naveed Qamar, however, argues that the high quantum of borrowing is a seasonal spike at this early stage of the fiscal because many funds have not been released as yet; and the government has to keep its departments, employees and projects afloat. We'll have to see whether the government is going to live up to its word on this front.