Dr. Gohar Ejaz, Chairman Economic Policy and Business Development think tank and former caretaker federal minister on Wednesday sharply questioned the effectiveness of monetary tightening in tackling Pakistan\u2019s fuel-driven inflation, arguing that raising interest rates would only inflate debt servicing costs without addressing the root causes of price pressures.<\/p>\n
In a strongly worded statement, the former caretaker federal minister and chairman of the Economic Policy and Business Development think tank said that recent increases in policy rates\u2014 by 100 basis points\u2014cannot influence international fuel prices, which remain the primary driver of domestic inflation amid ongoing global conflicts and supply disruptions.<\/p>\n
Citing the views of Nobel laureate Joseph Stiglitz, Ejaz stressed that supply-side shocks, particularly those stemming from global commodity and energy markets, are not effectively managed through higher interest rates. \u201cMonetary tightening cannot bring down imported inflation,\u201d he said, adding that such policies risk suppressing economic activity without delivering meaningful relief to consumers.<\/p>\n
He questioned whether the State Bank of Pakistan\u2019s decision to hike rates could either reduce fuel consumption significantly or alter international pricing dynamics, arguing that the answer in both cases is \u201cclearly no.\u201d<\/p>\n
Highlighting the fiscal consequences, Ejaz warned that every one percent increase in borrowing costs adds approximately Rs600 billion to the government\u2019s annual interest payments. \u201cAt a time when debt servicing is already projected to exceed Rs8 trillion this fiscal year, such policy moves will only deepen fiscal stress,\u201d he noted.<\/p>\n
He further cautioned that the ballooning cost of debt would inevitably translate into additional taxation, placing a heavier burden on citizens already grappling with high inflation and stagnant incomes. \u201cThis is not just a monetary issue\u2014it is a fiscal and structural crisis,\u201d he said.<\/p>\n
Ejaz urged policymakers to rethink the reliance on interest rate hikes as a primary tool for inflation control and instead focus on supply-side interventions, energy reforms, and measures to enhance domestic production. \u201cWithout addressing structural inefficiencies and external vulnerabilities, tightening monetary policy will only exacerbate the economic slowdown,\u201d he added.<\/p>\n
The statement comes amid ongoing debates over Pakistan\u2019s macroeconomic strategy under its IMF-supported programme, where balancing inflation control with growth and fiscal sustainability remains a key challenge.<\/p>\n","protected":false},"excerpt":{"rendered":"
Dr. Gohar Ejaz, Chairman Economic Policy and Business Development think tank and former caretaker federal minister on Wednesday sharply questioned the effectiveness of monetary tightening in tackling Pakistan\u2019s fuel-driven inflation, … Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":3072,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[6],"tags":[379],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/wattech.com.pk\/index.php\/wp-json\/wp\/v2\/posts\/4608"}],"collection":[{"href":"https:\/\/wattech.com.pk\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wattech.com.pk\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wattech.com.pk\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/wattech.com.pk\/index.php\/wp-json\/wp\/v2\/comments?post=4608"}],"version-history":[{"count":1,"href":"https:\/\/wattech.com.pk\/index.php\/wp-json\/wp\/v2\/posts\/4608\/revisions"}],"predecessor-version":[{"id":4609,"href":"https:\/\/wattech.com.pk\/index.php\/wp-json\/wp\/v2\/posts\/4608\/revisions\/4609"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/wattech.com.pk\/index.php\/wp-json\/wp\/v2\/media\/3072"}],"wp:attachment":[{"href":"https:\/\/wattech.com.pk\/index.php\/wp-json\/wp\/v2\/media?parent=4608"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wattech.com.pk\/index.php\/wp-json\/wp\/v2\/categories?post=4608"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wattech.com.pk\/index.php\/wp-json\/wp\/v2\/tags?post=4608"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}