In­ter­est rate drop to strengthen business sen­ti­ments: PEW

The Pak Banker - - NATIONAL -

The Pak­istan Econ­omy Watch (PEW) on Sun­day lauded the decision of State bank of Pak­istan (SBP) to cut pol­icy rate by one per­cent to prop up growth terming it es­sen­tial to strengthen business sen­ti­ments. The decision is pleas­ing as it will trig­ger eco­nomic ex­pan­sion, boost cap­i­tal mar­ket and support badly needed for­eign invest- ment, it said. Decision of the SBP will stim­u­late eco­nomic growth, en­cour­age bor­row­ing, in­vest­ing as well as ex­ports and help re­duce ra­tio of de­faults, said Dr. Mur­taza Mughal, Pres­i­dent of the Pak­istan Econ­omy Watch. He said that SBP decision will help our slug­gish econ­omy but in­ter­est rates alone can­not help over­come eco­nomic is­sues as it has noth­ing to do with en­ergy scarcity, se­cu­rity sit­u­a­tion, and po­lit­i­cal un­cer­tainty. Dr. Mur­taza Mughal said that be­fore the SBP state­ment the Fi­nance Min­is­ter Ishaq Dar told a press con­fer­ence the dis­count rate has been cut by one per­cent which has raised ques­tions about au­ton­omy of the cen­tral bank. Wel­com­ing the re­duced gov­ern­ment bor­row­ing by the gov­ern­ment, he said that it will help banks to fo­cus on pro­duc­tive sec­tors which will re­duce cost of do­ing business. He said that Pak­istan is fac­ing one of the low­est ex­pan­sions in the past decade due to in­ef­fi­ciency of politi­cians, en­ergy scarcity and mil­i­tancy. High in­ter­est rates dic­tated by the IMF for years has re­sulted in ex­pen­sive fi­nanc­ing lead­ing the econ­omy into a long pe­riod of slow growth, some­times close to con­trac­tion. Dr. Mur­taza Mughal said that the petrol cri­sis has hit eco­nomic ac­tiv­i­ties hard and it may re­flect in the an­nual growth fig­ures.

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