Inflation Easing: Time to Cut Rates and Boost Exports, Says FPCCI
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The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has urged the government to reconsider its recent petrol price hike, citing a decline in global oil prices and a strengthening Pakistani rupee.
FPCCI President Atif Ikram Sheikh argued that the government should have maintained petrol prices due to several factors:
- A $1 per barrel drop in international oil prices.
- The easing of tensions in the West Asia region, following the Iran-Israel conflict.
- Lowered economic activity leading to decreased demand for oil.
Sheikh expressed confidence in the Pakistani rupee’s stability due to the completion of the IMF-SBA program and the anticipated long-term IMF-EFF program. He also highlighted Saudi Arabia’s increased foreign exchange deposit in Pakistan’s central bank, further strengthening the country’s financial standing.
The recent petrol price hike, which saw an increase of PKR 4.53 per liter, comes on the heels of another hike just two weeks prior. Sheikh emphasized the negative impact of these successive hikes, including:
- The increased domino effect on essential goods prices.
- Heightened cost-push inflationary pressures.
The FPCCI President highlighted that prominent economists believe the rupee is undervalued and poised for further strengthening. He urged the government to consider these positive developments before raising fuel prices.
Sheikh emphasized the pressure from Pakistan’s business community concerning the rising cost of doing business due to the petrol price hikes. He also pointed out the FPCCI’s earlier warnings regarding the challenges associated with importing Russian crude oil.
Saquib Fayyaz Magoon, SVP FPCCI, emphasized the recent decline in inflation rates, reaching a 22-month low in March 2024. He called for a reduction in the key policy rate and the introduction of regionally competitive financing schemes for Pakistani exporters.
The FPCCI’s stance highlights the complex interplay between global oil prices, currency exchange rates, and domestic economic factors in Pakistan. As the government weighs its options, businesses and consumers alike await a decision that balances economic stability with affordability.