Islamabad, May 07, 2023 (PPI-OT): Former Vice President of FPCCI Atif Ikram Sheikh on Sunday said the demand of the IMF to hike interest rates should not be delayed as it will annoy the lender. IMF believes the interest rate hike is necessary for containing inflation however it will also significantly increase the debt burden, he said.

Atif Ikram Sheikh who has also served as President ICCI and Chairman PVMA said in a statement issued here today that IMF has asked Pakistan and some other countries to further increase interest rates to stabilise inflation. For the current fiscal year, the World Economic Outlook has projected 27.1 percent average inflation rate while the forecast is 21.9 percent for the next fiscal year, he added.

He said that SBP has already increased the interest rates to the highest ever level of 21 percent which has failed to contain inflation but it caused a significant surge in the government’s debt servicing cost, which is now estimated at around Rs5.3 trillion as against the budgeted figure of Rs3.95 trillion.

Since the start of the IMF programme in July 2019, Pakistan has doubled the policy rates but it has done little to improve the situation. IMF has projected our foreign exchange reserves at $11.7 billion while the growth rate is expected to slow materially from 6 percent in 2022 to 0.5 percent this year. Growth in the region will accelerate to 4.4 percent in 2024 but it will hover around 3.5 percent in Pakistan.

The business leader said that the IMF hoped that Pakistan is expected to start meaningful fiscal consolidation, including subsidy reforms which will compromise growth. The global lender thinks that Pakistan will miss the fiscal and debt reduction targets of this fiscal year and the situation will become worse in the next fiscal year with a budget deficit peaking at 8.3 percent, he said.

For more information, contact:

Atif Ikram Sheikh

Ex. Chairman PVMA, Former VP, FPCCI,

Former President ICCI, Former President HCCI,

Tel: +92-51-4437597, 4440772

Fax: +92-51-4440773