KARACHI: The State Bank of Pakistan (SBP) seems in hurry to take interest rate to even higher than the last year. After a gap of less than month, it revised interest rate upward by 100 basis points to push it from 8.75 % to 9.75 %. In November last, the SBP had reversed its interest rate policy by increasing it by 175 basis points. It gave rising trend in inflation and subsequent price -hike a basic reason to increase the interest rate. Independent economists , stakeholders of the stock market and the main opposition parties including the Pakistan Muslim League Nawaz (PMLN) and Pakistan People Party (PPP) had vehemently criticised SBP decision of revising upward interest rate in a big way.
Now, after less than a month, SBP gave another major push to the interest rate by adding 100 basis points to it.
Dr Abid Suleri, Executive Director Sustainable Development Policy Institute (SDPI) and member of the prime minister ‘s Economic Advisory Council, spoke on upward revision in interest rate by SBP. He said the global situation in the wake of the on-going uncertainity in the international market, the SBP decision seems a balancing act and it would help bring stability in Pakistan’s financial market. He quoted Turkey’s case in this context. Turkey’s Lira had depreciated 44 % in the last one year for not making necessary balancing act to adjust the interest rate with rising inflationary pressure.
The SBP has repeated the same logic of controlling the price-hike and bring stability in the financial market for another major increase in interest rate.
The SBP seems convinced that its decision of taming inflationary pressure with higher interest rate was a last instrument available with it. It may continue to jack -up interest rate until it reaches or even crosses its last year level of 13 % plus.
SBP Governor, Baqir Raza, was blamed of slowing down Pakistan’s industrial activity by jacking- up interest rate as high as 13 % plus. Many in Pakistan doubt credibility of Mr Baqir Raza as SBP Governor. Those who have adverse opinion about Mr Baqir Raza gave his last assignment with the International Monetory Fund (IMF) a basic reason to doubt his credibility and decisions as Governor SBP.
Advisor to the prime minister on Finance, Shaukat Tarin, told a private TV channel on Tuesday that rise in the interest rate would discourage dollarisation in the country. He also undermined the report that the government would be hit adversely by such a big increase in interest rate as it was a major buyer of the loans from commercial banks. He said total impact of the recent increase in the interest rate would be around Rs 100 billion.
