“Historic Hike” in interest rate is going to cause serious damage to “cost of doing business”, said Ateeq Ur Rehman (Economic & Financial Analyst).
While talking to our correspondent he further said that the decision to raise the discount rate by massive 1.5pc is like sending shockwaves to Business Community which is already struggling with rising cost from inflation, devaluation and Economic Slowdown. Instead of recovering our Trade Deficits due this hike the Exports will fall, Manufacturing Industry which is already not doing well will further suffer & Unemployment will grow.
He said that the Commercial Banks will be the utmost beneficiary as Government will heavily borrow from them. As understood the arrangements with IMF is that the Government is bound not to borrow from Central Bank therefore most of the borrowing by Government will be done with Commercial Banks .
He added Banks instead of Banking with public shall concentrate more in giving loan to Government. Government borrowing is expected to increase with Commercial Banks. In future, access to finance by Private Sector will be more difficult owing to disinterest and lack of concern by Banks and the lending rate which was available previously by 17% will shoot to 19%.
He further said that I failed to understand that how increasing the interest rates one can control inflationary pressures , exchange rate depreciation and elevated fiscal deficit. The fact is our Debts are increasing due to devaluation of currency, fiscal deficits, growing financial requirements and increase in interest rates.
