Finance ministry report notes draining effects of high interest rates on govt resources
Business
Central bank on Monday decided against rate cut
ISLAMABAD (Web Desk) – Record-high interest rates continues biting the government while resulting in skyrocketing borrowing costs, as the Ministry of Finance in a latest report noted that higher mark-up payments were a “major source of increase in current expenditures”.
The admission comes as world’s leading financial institutions and central banks – with some exemptions in South America and Japan – are persisting with monetary tightening with no sign of reviewing the policy.
Last week, International Monetary Fund (IMF) Managing Director Kristalina Georgieva said the world had been living in the "fantasy lane" for nearly 20 years. "So now ... our call to everybody is: buckle up. Make sure that you understand interest rates are here to stay for longer."
Separately, a Reuters poll says that high inflation will dog the world economy next year, with three-quarters of over 200 economists saying the main risk is that it turns out higher than they forecast, suggesting interest rates will also remain higher for longer.
Read more: Inflation to dog world economy next year, postponing rate cut calls
On Monday, the State Bank of Pakistan’s Monetary Policy Committee decided to maintain the interest rates at the current level of 22 per cent, although many market experts were expecting a cut.
The central bank has opted for a cumulative 1,500 basis points increase in its policy rate since October 2021 to curb soaring inflation and support the external balance. However, the rate hasn’t seen any change during the current fiscal year.
A SHINING LIGHT
The “Monthly Economic Update and Outlook” for October 2023 mentions a strong performance by the agriculture sector as Pakistan has been witnessing rising food prices – one of the main reason behind the persistent inflation.
It noted that cotton production was projected to rise 127 per cent (estimated at 11.5 million bales) for 2023-24, compared to last year. “Rice production is also showing an impressive growth 18 per cent compared to last year.”
Read more: Unlike Pakistan: India cotton output could fall 7.5pc on lower plantings
The report noted that the increase in the main crops’ production was encouraging for the exports and overall economic outlook.
Moreover, it added that input situation was positive as farm tractors production and sales showed a steep growth of 45 per cent percent (11,586) and 64 per cent (12,090) respectively during the Jul-Sep quarter of the 2023-24 over the same period last year.
However, sugarcane and maize production declined by 10.7 per cent and 6.1 per cent to 78.5 million tonnes and 10.3 million tonnes, respectively, compared to period under review.
