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KARACHI: The Pakistan Business Council (PBC) urged the State Bank of Pakistan (SBP) on Saturday to find a balance while deciding the monetary policy amid calls for a substantial interest rate cut.
The central bank should maintain a cautious and steady approach to avoid a sudden spurt in import-based demand that can impact the current account and the exchange rate.
PBC Chief Executive Ehsan Malik said the monetary policy, to be unveiled on Monday, must also factor in the IMF’s expectations of unconstrained imports and market-based exchange rates.
He said the Monetary Policy Committee would take note of year-on-year headline inflation in October, which was higher than in September, and an increase in month-to-month CPI inflation in core urban and rural areas. Further increases in power tariffs are expected under the IMF prescription, he added.
He feared that Pakistan has benefited from low fuel costs, but the continuing crisis in the Middle East could reverse this, adding that the monetary policy needs to be aligned with the fiscal policy.
“Tax targets set in the budget are not being met, mainly due to demand compression. Policy rate reduction is not the only way to generate demand,” Mr Ehsan said. SBP’s arsenal of tools includes cash reserve and consumer loan limits, which can be revised selectively.
Published in Dawn, November 3rd, 2024
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