Policy rate reduction to boost economic activity: Miftah Ismail

KARACHI (Dunya News) - Former Finance Minister Miftah Ismail tweeted that inflation was 3.5 percent in the first two months of the current fiscal year, and it could remain close to 6 percent in the coming months, which is better than in previous years.

Miftah Ismail added said that a reduction in the policy rate will make loans cheaper for businesses, which will increase investment, economic activity, domestic imports, and put the rupee under pressure against the dollar.

He said that the rupee is already under pressure from government budget deficits and international debt repayments. The government wants to keep the value of the rupee stable, but the depreciation of the rupee will further increase inflation.

The pressure on the value of the rupee has created a difference of ten rupees between the dollar rate in the open and interbank markets.

The former finance minister said that artificially keeping the interbank rate low is affecting exports, remittances are shifting to the Hawala Hundi market, and the government is taking steps like delaying LCs instead of taking loans and selling dollars.

Miftah Ismail said that the State Bank will have to balance its decision to change interest rates to control inflation.