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Strategy to tame inflation needs review: PEW
Feb '09
The Pakistan Economy Watch (PEW) on Wednesday said systematic plan of action to bring inflation down needs to be revisited as it is threatening some most critical sectors of the economy.

State Bank of Pakistan seems very concerned about inflation, as everything has become more valuable except rupee. However, it seems that successful efforts to bring down inflation are also bringing industry, manufacturing, exports and number of employed down.

“The survival of manufacturers, exporters and millions of employees is at stake due to cost of credit,” said Dr. Murtaza Mughal, President of the PEW. Industrial units are closing down in large numbers which is sending wrong signals.

Many industrial units are not viable anymore but the owners are running them to remain in business, keep presence in international market or preserve the family honour, he said.

Talking to a group of Industrialists he Vice Chairman of PEW Muhammad Akram Shahid and Dr. Murtaza Mughal said, “There must be some missing links in the monetary policy; every thing cannot be compromised just because some policymakers feel strongly about progressive price increase.”

Suppressing inflation is not the only obligation of the regulators. Who will frame policies to boost or at least maintain domestic production which is sliding at a fast pace threatening whole system, he asked.

“We have developed habit of obeying every demand of the international lenders except for taxing sacred cows,” he said. The tendency is an obstacle in achieving tax-to-GDP ratio.

With one of the highest power consumption requirements the world which has nothing to do with the development, one of the highest interest rates, widening trust deficit and uncertainty touching skies, we should have concrete plans to revive ailing economy.

Otherwise, he stated, annual development spending would have to be compromised.

Inflation is not the only threat; we should also take sliding savings and revenue collections into account. Consumer finance conditions or banks needs to be made stringent to block unplanned expansion and avoid any crisis.

Apart from high interest rates, identification of the leading indicators accelerating inflation is imperative. Slashing petroleum prices can also bring down inflation soothing worries of policymakers.

Economy should be set free from the shackles of a high-interest squeeze. There is a need to act swiftly before the damage goes beyond repair.

Pakistan Economy Watch

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