–PML-N’s Zubair says SBP rate cut of 75bps won’t help economy, calls for drastic measures
LAHORE: Former Sindh governor and Pakistan Muslim League-Nawaz (PML-N) leader Muhammad Zubair said the federal government led by Prime Minister Imran Khan was ill-prepared to deal with coronavirus outbreak.
In a conversation with Pakistan Today, the former governor said the PM’s address to the nation on Tuesday showed that the government was groping in the dark concerning the outbreak. “PM only knows two words ‘Ghabrana Nahi’,” he said, taking a jibe at Imran’s much-famed mantra.
“What was the speech supposed to convey,” he questioned and added that people expected specific economic measures from the government, but the PM said nothing about that and spent his address praising the ‘incompetent’ Balochistan government.
“We all know the mess we are in is created by the Balochistan and federal governments,” he said in reference to the entry of Pakistani pilgrims from Iran.
The PML-N leader also criticised the State Bank of Pakistan for an insignificant cut of 75 basis points in the policy rate.
“At 13.25pc, it was simply not viable to do business, especially those competing in the global markets. Such high interest rates in an environment of a fast deteriorating economy simply did not make sense,” the former governor added.
He said to add to this the massive devaluation, unprecedented increase in gas and electricity tariffs and almost an unbelievable increase in taxes was a recipe for economic disaster.
“So, when coronavirus started having its impact, it was natural that businesses and others expected SBP to take bold measures, including a massive rate cut. A significant decrease was being demanded before the coronavirus and now after the outbreak, there was a need for bold measures,” he said.
So, the March 17 announcement by SBP has left everyone wondering if the present government, especially the SBP governor even has a basic understanding of the dismal situation Pakistan faces and the role that SBP needed to play, he said.
He added that a rate cut of 0.75pc wasn’t enough even before the new crisis. Back in November or around, everyone expected SBP to gradually cut rates reaching single digits by mid-year.
“But SBP Governor Reza Baqir and the present economic team have their own thinking. Whatever that thinking is, it could only lead to a further economic mess and possibly civil unrest of the kind that we have not seen in the country,” the former governor said.
He added that the SBP governor himself admitted that Pakistan’s growth will be around 2pc. “But how can that growth pick up if the policymakers are not ready to undertake drastic measures,” he asked.
20 countries around the globe have come up with significant rate cuts in recent days. That’s one of the several economic measures they have taken to ensure the economy survives as a result of the virus attack, the economic expert added.
Zubair shared that the Federal Reserve in the US has cut the rate to zero – just to play its role in ensuring economic survival. He added that the hot money formula doesn’t seem to work as well. Huge amounts have left in recent days and more is expected in the coming days.
“The stock market expecting a significant rate cut is again down almost 2000 points today – showing its disappointment at the government’s inaction,” Zubair said.
The former governor recalled that since August 2018, this government has repeatedly failed in its key objective- economic management. “It has failed again in coping with this latest crisis. No one knows where we are heading but one thing is sure – the government of Imran Khan does not have the capacity and competence to handle and manage this country.”
“Yes we can surely expect multiple reasons to justify failures just as it has been doing since it came to power,” he said, adding that imagine this country does not have an FBR chairman since December and no Board of Investment chairman.
