Jumbo rate hike will devastate masses, businesses

(November 22, 2021): The Pakistan Economy Watch (PEW) on Monday said an enormous interest rate hike by
the State Bank of Pakistan to control stubborn inflation and deficit will shatter the masses
and businesses.
 
Due to the deteriorating economy, the central bank will soon raise interest rates again
while the government will raise gas, petrol and electricity prices but it will never reduce
its lavish spending to improve the situation which will keep rupss, the worst performing
currency in Asia under pressure, it said.
 
The interest rate hike is the result of the decision of the United States to punish Pakistan
for its increasing ties with China and pursuing independent Afghan policy, said Dr.
Murtaza Mughal, President PEW.
 
He said that disastrous economic policies have increased the current account deficit and it
has exceeded all targets by 4.7 per cent while interest rates hike will increase the
country’s debt by at least Rs 300 billion.
 
Pushing Pakistan at the top in Asia as far as the inflation is concerned, the government
will have to put emphasis on economic stability instead of growth, as inflation is
skyrocketing and the balance of payments is in serious jeopardy, he added.
 
Dr. Mughal said that the government has remained more concerned with its reputation
than the economy which was a perfect recipe for disaster.
 
Now the interest rate has jumped to 8.75% which will increase the cost of doing business
and the business community will pass the burden on the people, he observed.
 
So far the IMF has refused to sign the agreement and the loan will be given only after
completion of preconditions, after which Pakistan will be able to borrow from the
international bond market.
 
He said that interest rates reflect the overall economy. When interest rates are low, the
economy grows and when interest rates are high, the economy shrinks. SBP policies will
not hurt the elite but add to the suffering of the man on the street.