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+--- Thread: Tarin hints at interest rate rise to curb inflation (/showthread.php?tid=1738)
Tarin hints at interest rate rise to curb inflation - Naveed Yaseen - 11-01-2008 09:12 AM
By Salman Siddiqui
KARACHI: Adviser to the Prime Minister on Finance, Shaukat Tarin, hinted an increase in the policy rate in short run to overcome unprecedented inflation and to run away from facing default like situation in the near future.
He suggested this at a meeting with bourses brokers held here on his visit to Karachi Stock Exchange (KSE) on Friday.
Prior to this, he held a meeting with the Board of Directors of KSE, in which the board submitted a coherent plan for reviving the sickly economy and local bourses too, Tarin told.
He renewed his promise to activate Rs20 billion worth market support fund well before floor mechanism was removed at KSE and maintained this would be done within a few days.
“I believe actions speak louder then words and I will not let my promises go empty,” he said. However, how long it will take KSE to remove the floor then it all depends on the KSE board, he replied.
“This government will not take unnecessary pressure, but will take some harsh decisions after ruminating on many issues. And it all would lead us towards recovery in the economy,” he stated.
Tarin assured the brokers community to unveil a comprehensive government’s plan for reviving the economy within six to eight weeks and added Pakistan will not buy IMF offered package on tough conditions, but on home grown plan. It was learnt that IMF has been emphasizing Pakistan to make a 3.5 per cent to four per cent increase in discount rate, which at current stands at 13 per cent.
Moreover, the country forex reserves have fallen below $7 billion last week. In his talk to the brokers, Tarin shared that the Island and Hungry, the two European countries, had to increase their policy rates substantially to opt for IMF package, as they were too in financial crisis. The adviser stressed the brokers to widen their vision and think in the broader perspective of the economy. “When the economy will be well, money exchange rates will be stable and country law & order situation will be under control then the environment would turn itself into investment-friendly; and investors would come from outside and inside the Pakistan would stage comeback themselves,” he replied.
He further said the government was working for institution building in the country and would reform the Planning Commission (PC) and the Federal Board of Revenue (FBR). The country was having no such platform where it can discuss its future projects and review progress on them ahead.
Therefore, the PC was being transformed into a place where projects would be discussed with all concerns and stakeholder on board and the PC chairman would be authorized to call review meetings of any future projects. To make the PC a powerful institution the Ministry of Finance would also transfer some of its powers to the PC, Tarin announced.
He also expressed his anger over taking every matter to Islamabad of the country. He added that his government would also rationalize number of taxes and would remove some presumptive taxes like Capital Value Tax (CVT) in securities transaction and withholding tax in electricity bills. Moreover, the government will also inflate tax-to-GDP ration to 15 per cent from 10.5 per cent at current. It will not be done overnight, but will take five to seven years.
The government was also working to make the entire industrial sectors competitive and for that purpose it was setting its prime focus on three major areas i.e. agriculture, manufacturing and trade.
The government was also shifting its policy from ‘consumption led growth’ to ‘production led growth’ in the time to come. He was of the view that banks have turned into profit making institution after coming under private sector in Pakistan and now the time has come when they should extend their support hands towards their old time precious clients when clients were in trouble e.g. KSE members.
He added there were many areas like energy on which the government was working aggressively to make them viable.
http://www.thenews.com.pk/daily_detail.asp?id=144148