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Rising Investment Costs Tanveer Farooq 7509 Presented to:Sir Qazi Adnan Hye
What the case is about? • Problems • Certain problems led to the increase in the investment costs such as, • Hiking of policy rate • When capital goods had started picking up • Increase in interest • Depreciation of Pakistani rupee • Absence of stable interest and exchange rates • Tight Monetary policy • Failed to Control inflation or discouraging fiscal deficit • Increase Debt servicing cost
Cont’d • Will Pakistan be a Permanent client of IMF? • Enormous cost of fighting militancy. A self-created problem? • Cost of war is amounting to $80 billion Problems Summarized: • Prolonged war • Heavy debt • Currency printing
Loop Holes in the policy • Tight monetary policy • Foreign reserves have been piled at the cost of economic development • State bank has failed to consider business opinion on inflation • Managing macroeconomic stability through Foreign capital and financial inflows
Recommendation • The last and the reasonable action for policy makers is to Mobilize Domestic Resources • Improve tax revenue by making tax administration efficient