LAHORE: Economic Policy & Business Development (EPBD) — an independent think tank providing strategic advice to policy makers on the economic policies ecosystem — wants the government to immediately reduce policy rate to six percent to restore industrial viability and economic growth.

“With inflation at 3.2pc, the current 11pc policy rate imposes a crippling 7.8pc real cost of capital on Pakistani businesses. Therefore, the government must bring down the policy rate to 6pc with immediate effect to restore industrial viability and economic growth,” demands EPBD chairman and former commerce minister Gohar Ejaz in a conversation with Dawn on Sunday.

He warns that ahead of the upcoming Monetary Policy Committee (MPC) meeting scheduled for July 30, Pakistan’s businesses face an existential threat from unsustainable monetary policy.

According to him, the anticipated minimal 0.5pc-1pc rate reduction fails to address the fundamental crisis destroying Pakistan’s industrial competitiveness and fiscal stability. While regional manufacturers’ access capital at an average of 5.5pc policy rates, Pakistani industry faces 11pc—double the regional average, he points out.

This disparity, he says, combined with energy costs of 12-14 cents per kWh versus regional levels of 5-9 cents, creates insurmountable competitive disadvantages. Pakistan’s real interest rate of 7.8pc represents the highest burden among regional economies, more than double of India’s 3.4pc and over five times of China’s 1.4pc, he highlights.

This excessive real cost of capital makes Pakistani business investments fundamentally........

© Dawn Business