On January 2020 the prime minister Imran Khan in an addressing to the World Economic Forum at Davos said that 2020 is going to be included in one of the economic growth years of Pakistan.
However, for the residents of Pakistan, the financial year 2020 proved out to be the worst as they suffered the highest inflation rate in the world pressurizing policymakers to escalate interest rate.
According to inflation monitor for April published by State Bank of Pakistan (SBP), Pakistan suffered the highest inflation rate not only in comparability with advanced economies but also with appearing economies.
When the SBP increased the interest rates to settle down the inflationary pressure during the fiscal year, it didn’t turn out to be productive. The private sector stopped borrowing valuable money, which made hurdles for industrial growth and other services, and they had to increase inflation further.
The SBP increased the interest rates to 13.25 per cent after the 12-year high inflation witnessed in January at 14.6 per cent.
But the whole economic scenario was messed with the coronavirus outbreak. The SBP was compelled to restrict the interest rates within just three months to 5.25 per cent because the demand contraction reduced inflation.
The rate restriction announcement came when the inflation rate slowed down and reduced to 8.2 per cent in May, which is much lower than the SBP escalations for the month.
Pakistan’s inflation in relation to other developing economies like China, India, Bangladesh, Thailand, and Sri Lanka has reduced, as shown in a detailed graph associating SBPs Inflation Monitor.
The inflation for July-May for the current monetary year dropped down to state bank’s recent projections. It is predicted to fall further in June.
During the last two months, the government has reduced the petroleum prices three times which has dramatically reduced the cost of transportation, production and resultantly cut down inflation.
However, a known industrialist, Zubair Motiwala, in an interview, requested the government further to reduce the interest rate lower than 5.25 per cent to give progress to economic activities.
In addition to demanding a further decrease in interest rates, the trade and industrial sectors also admit that to recover completely; the economy needs an additional aid of Rs3-4 trillion.
With the rapidly declined economy, the collection of revenue has also collapsed of its goal.
The SBP has provided aid to hundreds of billions in the form of principal amount postponements, debts extension and giving loans on accessible terms to avoid massive cutbacks.