Former Minister of State & Chairman Board of Investment Muhammad Azfar Ahsan shared his disappointment with the recent hike in the policy rate. He said, “The State Bank of Pakistan (SBP) set back the industrial sector particularly and the business community at large, by raising the policy rate to 22% and making it the highest in the current century. This SBP Monetary policy committee meeting held out of turn, created a shockwave in the corporate world, by this decision.”
We may be looking at domestic, commercial, and industrial borrowers defaulting any time soon.
An economic survey has shown the Industries’ negative growth of 2.4%, while the services sector is barely at 0.86%. Due to the devaluation of PKR against USD, the economy had already slowed down with the per capita income down from 1765 to 1568 in the current financial year which is a good USD 197 decline.
The decision, he said, is in contradiction to its earlier verdict of June 12, 2023, and makes it clear that the economy is facing demand pressure which is not going to ease out, and in fact will take inflation a notch above, adversely affecting domestic investment.
He explained that this policy rate of 22% combined with the additional charge of at least 3% as the bank’s lending margin will bring the payable by the customer to a solid 25% at the least.
This is death to any developing industry or businesses. Most of the loans in Pakistan are on a floating rate and loans issued during the lower policy rate regime, now face this undesired increase too.
Pakistan, at this point desperately needs the support from all stakeholders and this hike in policy rate is certainly pushing the trajectory in the wrong direction.
