Monday , May 16 2022

Living with higher interest rates – Egunkaria


The central bank's 150-point increase in basic key policy has begun to show that its current highest profitability has dropped by 3.8 percentage points and has sent strong financial markets and the International Monetary Fund (MFI).

Its short-term loan rate rises to 8.5 pc by 10 pcs and will be more effective in the next two months. While the announcement of the rate, SBP may be between 6.5 and 7.5 pct in inflation between 2018 and 6 pc and economic growth would be higher than 4pc.

As our new government will fulfill the promise of creating new jobs, this economic growth will allow greater fiscal discipline, on the one hand by improving external financing and on the other. In this way, growth will not accelerate more than 4pc, limiting the scope of generating employment on a large scale.

Large doses of extraction have been required to access the political rate in two-digit zones. Confirming the fact that the Pakistan Bank State (SBP) is serious about finding a real merit for local currencies.

An MFI mission has said that the authorities have recently been overlapping Ruperak's fund perspective and tightening the monetary prescription to a lower budget than the 30s, to verify the increase in monetary supply.

Increase in bank loan rates will have a greater financial cost for many sector subsectors, and they are no longer sitting at their ATMs, due to retail growth

On November 30th, the political rate increased when the rupee was preceded by $ 139.06, going to the financial markets to end the uncertainty of reaching MFN.

Apart from the political positioning and position posed by these events, Pakistan is looking for a new FFI loan. The distributors say that it was necessary to direct them to financial markets, according to Asad Umar's parliamentary statement, the government did not rush to get FF loan.

During this fiscal 4 months and a half, there has been unprecedented growth in banks in private sector loans. Why? In fact, the government borrowed from the central bank (read print money) to withdraw prepaid commercial banks and meet current expenses. This means that banks did not park excess liquidity, except for private sector loans. And why was the private sector occupied by excessive borrowing from banks? In future, as the improvement of the interest rate forecasted more, the banks earned money.

"Therefore, the most important policy-rate growth would be to be borrowed from the private banking sector," says a senior bank treasurer. "Looking forward, credit will increase growth so far".

This is possible after the withdrawal of large banks from large central banks and commercial banks, the financial ministry will change the gears: the central bank will withdraw more central banks. Banks will rush themselves for government loans.

The growth of interest rates at that time is showing a large-scale manufacturing (LSM) contraction, both good and bad. It is good that, in this sense, the demand for credit in the industrial sector is slowing down over the next few months, the narrower interest rates will not increase their feelings of growth as they have a higher demand.

But it is a bad thing to say that the LSM sectors are doing well, and it could be a growth with the investment of production capacity.

But monetary sharpening favors expansion and at the same time saves investments over time and saves local savings through local savings in the future.

The January policy since January has 275 points and other policy measures are likely to have a national demand for the day, SBP said in its statement of monetary policy. Finally, as expected from the fall in the previous year's production of 2018-1920 and a moderate forecast in economic activity, the LSM contraction has led to the central bank having projected economic growth in the current fiscal year to be slightly higher than 4pc.

The LSM outflow has dropped 1.71 pc in the first three months of this year's event. 15 Ten industries in the LSM, such as textiles, food, fertilizers, automobiles and iron and steel have been manufactured.

Following a recent cushioning, the increase in the lending rate of the banks results in a higher financial cost when they are the most important industrial sectors because they are not sitting at their ATMs.

On the other hand, the highest interest rate benchmark can also be detrimental to the five LSM sectors, as the trend of production has been upwardly rising to date. Electronics, leather products, paper and board, engineering products and rubber products. These LSM sub-sectors are experiencing problems due to the higher cost of imported impacts after the amortization of errors.

Business managers are afraid that most of the impacts of monetization will be in small and medium-sized enterprises (SMEs). Fear of low economic growth, a weaker eruption and the highest interest rates, the growth of SME loan prices. Which, at the same time, will ban the loans granted to the SME sector, especially when banks start to borrow from banks. From July 1 to November 16, the federal government withdrew appeals for Rs2.63 trillion for commercial banks by borrowing Rs2.99tr.

But after the Pakistani FIP program, SBP loans have to be disciplined, senior bankers say.

Published in Dawn, The Business and Finance Weekly, December 3, 2018

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