Renowned economist Faiz Ul Haq has said that International Monetary Fund (IMF) conditionalities will push policy rate even further – and, the same has nothing to do with the real-world implication of interest rate hikes vis-a-vis Pakistan. Faiz Ul Haq added that in a country where only 7 percent of its business community takes loans from banking channels, raising interest rates is
no more than a fallacy. We have come a long way on a burgeoning path of 7 percent to 16 percent policy rate progression over the course of the last one and a half years; however, we have only witnessed a persistent and no-end-in-sight increase in headline inflation and other indices, he added. Senior Economist Faiz Ul Haq said that we are living in an almost quarter a century’s highest policy rate regime in the country despite witnessing one of the most devastating floods in recent human history not only in Pakistan.
I am startled at the fact that the world is willingly testifying on our economic losses and our damages are quantifiable; and yet, we have not been able to extract any concessions for our people from lenders, he added.
Faiz Ul Haq apprised that even on a textbook-level, the world is back to the practice of a discounted policy rate as compared to inflationary pressures & their policy responses to the inflation trajectories and it is a norm again and, at instances, it is many fold.
Faiz Ul Haq has elaborated the real reasons behind the unabated inflationary pressures as the triple whammy of diverse factors: (i) uncontrolled rise of dollar – far above the real effective exchange rate (REER), i.e. the only point where the finance minister seems to have stood his ground so far (ii) supply-side disruptions of essential & staple foods basket, hoarding & profiteering, maladministration & non-existent planning for food security.—NNI
