Seminar on Pakistan economy, inflation held

Pakistan Institute of Development Economics (PIDE) on Sunday hosted an ‘Informal Conversation on Pakistan Economy’ which was also attended by senior politician and former minister for Privatization Daniyal Aziz.

It was hosted by Dr Nadeemul Haque, Vice Chancellor PIDE. The session was attended online by a number of PIDE economists while many other members of the institute attended in-person, according to a statement issued by PIDE.

During the session, the issue of high inflation came under discussion in the conversation. The pros and cons of measures such as administrative controls, increasing interest rate and structural changes for long term inflation management were thoroughly discussed. Daniyal Aziz considered ‘inflation’ to be the biggest challenge for the new government.

He stated that regulating the monetary side instruments of the State Bank of Pakistan (SBP), in particular the interest rate, has been misused.

He began by using some statistics of the 2003-08 period which he termed as the basis of all current economic ills of the country. Daniyal was also critical of the rise in Gross Fixed Capital Formation (GFCF) in the same time period due to lack of impact it had in increasing production in the country.

In short, he termed the economy a bubble during these years and the bubble continues to hamper Pakistan even today. Furthermore, he opposed the government policies during the Covid-19-induced economic crisis through initiatives such as TERF etc.

Daniyal expressed that these schemes make the policy rate set by the SBP in the Monetary Policy ineffective as the schemes offer a much lower rate than the policy rate decided by SBP.

Daniyal Aziz was critical of SBP’s shortcomings in meeting the inflation target as set out by the ministry of finance on most of the occasions, and also suggested strict action against the SBP governor in future if this continues.

Lastly, Daniyal Aziz put forward the idea of a policy sensitivity analysis for both the fiscal policies and the monetary policies to better reflect the ground realities in PIDE’s policy suggestions to the government.

Published in The Express Tribune, April 18^th, 2022.