ISLAMABAD – Former caretaker federal minister Gohar Ejaz has said that the monetary policy is strangling the economy – the interest rate in Pakistan is 11% against 3% and 5.5% respectively in China and India, and demanded bringing it down to 9%.
The monetary policy is suppressing tax-paying business activities, said the former minister in a statement released here Sunday. Gohar Ejaz said that the State Bank’s monetary policy meeting will be held on July 30. Pakistan’s interest rate is 11%, while India’s is 5.5% and China’s is 3%. Gohar Ejaz said that the FBR has set a target of an 18% increase in tax collection, but the monetary policy is stifling tax-paying business activities. He demanded that the interest rate should be immediately reduced to 9% and brought down to 6% by December 31, 2025.
Pakistan has strong potential in manufacturing and exports, but the monetary policy is blocking economic growth. Gohar Ejaz said that on July 30, it will be decided whether Pakistan gets competitive support or not. He added that the cost of doing business in Pakistan is double compared to regional countries. Electricity rates in Pakistan are 12 to 14 cents per unit, whereas in regional countries electricity is available at 5 to 9 cents per unit. Unemployment in Pakistan is 22%, while in India it is 4.2% and in China 4.5%. Industrialists are demanding that the monetary policy committee prioritize business activities. A reduction in the interest rate will reduce business costs, increase economic activities, and create jobs. Gohar Ejaz stated that reducing the interest rate would save 3 trillion rupees. There are multiple ways to restrict unnecessary imports in economic policy. He further said that the 2022 boom-and-bust cycle did not occur due to low interest rates. In 2022, $3 billion worth of vaccines were imported, and an additional $12 billion was spent on oil and gas imports due to the Ukraine war. These factors had nothing to do with the domestic interest rate. An 11% interest rate against 5% annual inflation is incomprehensible.
