Media watch: Rise in interest rate

Media discuss recent hike in the discount rate and its possible effects on govt borrowing and private investment.

Media watch is a daily round-up of key articles featured on news websites, hand-picked by The Express Tribune web staff.

Government borrowings

Businessmen particularly detest expensive credit because it pushes their financial costs, squeezes their profit margins and affects their expansion plans. Still, it is illogical to dispute the rationale behind the bank`s decision to raise the rates: the bank has to be proactive if it is to manage the emerging risks to the economy. It cannot sit on the fence and wait for inflation to take down the economy even if the “burden of the monetary tightening is being largely borne by the private sector”. (dawn.com)

Interest rate raised

If, as the present government is doing, it continues spending like there is no tomorrow, while maintaining a vast army of Cabinet ministers complete with their taxpayer-paid extravagant lifestyles, even the central bank will find it impossible to ignore the disequilibrium thus introduced into the economy. The latest bimonthly review also saw a decision to strictly implement the revised limits on borrowing, even if it meant stopping payments to provincial governments. (nation.com.pk)

Flying the flag of fiscal failure?

And, are the politicians willing to let go of the power to dole out? The SBP can only give a reply with the monetary tools it holds. The solutions to address the prevailing security and economic conditions lie squarely with the fiscal authorities, ie, political leadership. One must not lose sight of the fact that the central bank does not act alone to cause policy failures in a country. (brecorder.com)

Hiked interest rate

The economies of most countries today are affected by the global recession. The economies of several countries are affected by the war on terror. But Pakistan is the only country that is facing, in addition to the other two problems, one of the most disastrous natural calamities of recent times. These would have been tough times for any government. But the incumbents can affect change, first by cutting unnecessary expenditure and then by finally start negotiating with the military to do the same. (pakistantoday.com.pk)

Misplaced SBP formula

Even if we concede that government borrowing could be limited by the SBP, its positive impact will be eroded by the increase in the cost of production. Three consecutive raises in policy rate during the last six months have shown that this measure had a marginal, if any, impact on inflationary trends, which are driven by other factors. (dailytimes.com.pk)