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SBP’s 17% policy rate hike receives mixed reactions

 Business leaders have reacted differently to the Monetary Policy Committee's (MPC) decision to raise the policy rate by 100 basis points to 17%.

While some have hailed the action as being important to control inflation and stabilise the economy, others have criticised it as possibly harming economic growth.

According to Jawad Ahmad, Country Head for OneAgrix, "The MPC has taken a sound choice in view of the current status of our low foreign exchange reserves. To make the Pakistani rupee more competitive versus the US dollar, at least $3 to $3.5 billion is needed .

The SBP has chosen to encourage people to save in local currency as a solution to this problem. Although this choice would have a detrimental effect on some industries, he argued it was vital for the state of the economy as a whole.

Arsalan Siddiqui, head of research at Optimus Capital Management, wasn't shocked by the central bank's choice. "Given the increased headline or core inflation, raising the policy rate is consistent with our forecasts. The MPC believes that there are now greater downside risks to the SBP's baseline growth projection for this year. CEO of Alpha Beta Core 

The effectiveness, on the other hand, was questioned by Khurram Schehzad, who claimed that "The SBP should not have raised the interest rate as it will not affect currency parity because that is already being artificially managed by the government, just like imports are being artificially restricted." The only choice that has now become inescapable is raising currency parity to market levels, which will undo the majority of the harm, increase the effectiveness of interest rate increases, and boost dollar flows to official markets. Additionally, it will facilitate IMF onboarding, according to Schehzad.

However, several businesses advise that the government look for IMF alternatives.

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