Lahore: The Pakistan Economy Watch on Sunday lauded the decision of State bank of Pakistan (SBP) to cut policy rate by one percent to prop up growth terming it essential to strengthen business sentiments. The decision is pleasing as it will trigger economic expansion, boost capital market and support badly needed foreign investment, it said.
Decision of the SBP will stimulate economic growth, encourage borrowing, investing as well as exports and help reduce ratio of defaults, said Dr. Murtaza Mughal, President of the Pakistan Economy Watch. He said that SBP decision will help our sluggish economy but interest rates alone cannot help overcome economic issues as it has nothing to do with energy scarcity, security situation, and political uncertainty.
Dr. Murtaza Mughal said that before the SBP statement the Finance Minister Ishaq Dar told a press conference the discount rate has been cut by one percent which has raised questions about autonomy of the central bank. Welcoming the reduced government borrowing by the government, he said that it will help banks to focus on productive sectors which will reduce cost of doing business.
He said that Pakistan is facing one of the lowest expansions in the past decade due to inefficiency of politicians, energy scarcity and militancy. High interest rates dictated by the IMF for years has resulted in expensive financing leading the economy into a long period of slow growth, sometimes close to contraction. Dr. Murtaza Mughal said that the petrol crisis has hit economic activities hard and it may reflect in the annual growth figures.