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Business community hopes dashed - LahoreEstate - 02-01-2009 05:13 AM
LAHORE - Country’s economic growth is crawling to a halt due to the interest rate, almost highest in the world, thanks to the government which is more than willingly to accept this hidden condition of the International Monetary Fund, pushing the industrial sector on the verge of collapse. Economists said the country is in the clutches of IMF due to which the government is helpless to cut down the discount rate. On the other hand, the businessmen and industrialists blasted the State Bank of Pakistan for keeping the discount rate up and demanded to immediately cut it down to save the industry from a total collapse.
Sources said the SBP had given green signal to the government that the discount rate might be cut down but the helpless government could not do so until it is allowed by the Fund. The SBP had increased its discount rate by 200 basis points, to 15 percent, which is the highest discount rate in the world.
The government is waiting for the approval of the IMF to cut down the interest rate. The Fund’s delegation is visiting Pakistan this month to review the implementation on its programme.
The government will take up the issue with the IMF team during their expected visit, and if got a nod from them, the government will be able to cut down the discount rate, economists revealed.
On Saturday, the SBP announced to freeze the discount rate at the previous position (15 per cent) and made it clear to the stakeholders that the discount rate could not be brought down.
Experts also dispelled the impression given by the SBP that inflation could be controlled with increase in the interest rate. “Inflation has nothing to do with the interest rate,” they opined. They said mark-up rate is always increased on the pretext of high inflation whereas controlling inflation is not the job of industry, rather it’s purely a task of central bank, which is playing the role of a silent spectator instead of taking concrete measures.
http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/Politics/01-Feb-2009/Business-community-hopes-dashed