Interest rate hike an ‘economic catastrophe’: Miftah

Former finance minister says the latest move will further slowdown the country’s economy

ISLAMABAD:

Pakistan Muslim League-Nawaz (PMLN) leader and former finance minister Miftah Ismail has termed the increase in interest rates catastrophic for the country's economy.

His statement comes after the State Bank of Pakistan on Friday increased the benchmark interest rate by 150 basis points to 8.75% for the next two months.

Miftah said the rising interest rates will only reduce industrial production and increase inconsequential government spending.

One and a half per cent rise in interest rate will not have any impact on inflation, instead the private sector will face more difficulties and would slowdown, he said. Increasing it from 7 to 9 per cent would further increase the government's interest payments by Rs400 billion annually, the PML-N leader added.

“The PTI government had tried to control inflation and depreciation of the rupee with similar measures in the past but because of that the economy fell further into recession,” he maintained.

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“The Imran Niazi government has already reversed the country's economy by raising interest rates. Once again, interest rates are rising sharply, the economy is already super slow, it will slow down further,” Miftah said.

He questioned how could inflation, which is setting the country on fire, be brought under control by raising interest rates so fast? The current account deficit is set to reach an all-time high of $15 billion in October, he claimed.

It is virtually impossible to stop further devaluation of the rupee, especially when imports of $75 billion are inevitable, he said.

The former finance minister urged the PTI government to reduce its “lavish expenses”.

Miftah asked the government to provide gas to industry and other sectors on cheap rates to increase the exports.

“Pakistan's current inflation rate is not due to reduction in interest rates but due to the government making things more expensive especially electricity, gas and petrol,” he added.