Government has accomplished the peak of interest rate hikes by revising it for the four times in the current year and any further increase will be devastating for the economy, Pakistan Economy Watch said Friday. The downward trend in prices is because of economic slowdown and there is nothing on the credit of administrative measure, said Dr. Murtaza Mughal, President, Pakistan Economy Watch.
He said that there are complaints of lack of coordination between authorities and central bank. This is leading economy on polices that have no logical or meaningful connection. There is a serious lack of insight into the problems, it is generally believed. “We have highest interest rates in Asia which is hurting all sectors including industry, services and agriculture; it has barred investments and increased fears of bankruptcies,” he said.
Banks have taken an additional sum of around Rs70 billion out of the pockets of borrowers due to rate hikes, he added. Nevertheless, he said that sometimes central banks are left with no option but rate hike to tame inflation and control other related matters.
The circumstances demand to keep an eye over all local and international developments and cut rates to support growth targets. International Financial Institutions hate rules and regulations; and love privatizations as well as restructuring. The lenders push the loan recipients for rate hike that are not in the national interest.
“The international meltdown has cut demand and now Pakistan’s economy is not under such strain as it was few months back and a cut in rates will help economy prosper,” said Dr. Mughal. Other issues including that of refinancing and discount rates can also be reviewed for possible trimming.