There are problems like rising inflation, complex energy tariff structure, sharp increase in additional custom duties and regulatory duties, exorbitant indirect taxes, pilling up of circular debt and chances of current account deficit. Therefore, the State Bank is expected to retain basis points at 11 pc said ateeq ur rehman (economic & financial analyst).
This maintenance of the policy rate may spark mixed reactions across economic circles. While the State Bank’s caution reflects a desire to contain inflationary pressure and preserve macroeconomic stability, many experts argue that the high policy rate environment continues to stifle investment, industrial productivity and employment generation.
Businesses facing escalating costs of production and limited access to affordable credit fear that the unchanged rate may slow down the pace of economic recovery, particularly in the manufacturing and export oriented sectors, said ateeq.
The warning by IMF indicating the delay in governance reforms, legislative amendments and privatization of state owned enterprises continue to pose significant fiscal and economic risk, this may tighten the monetary policy further. The jump in domestic debt / external debt is in big number thus projecting Debt to GDP ratio is on higher side, thus this will impact on implementation of monetary policy.
