ISLAMABAD: The boom and bust cycles in the country was caused by the surge in international fuel prices and not by consumer goods imports driven by low interest rates that triggered the bust, former caretaker federal minister for Commerce and Industries Gohar Ejaz said.
In both 2018 and 2022, it was external fuel price shocks—not domestic policy rates—that led to higher trade and current account deficits, he added.
‘Pakistan needs to align fiscal, monetary policies’
Former minister stated that very interesting data for those who believe that the boom and bust cycles of 2018 and 2022 were caused by low interest rates. In both cases, it was the surge in international fuel prices—not consumer goods imports driven by low interest rates—that triggered the bust.
He said that Rs3 trillion is being wasted annually in government expenditure due to high interest rates. Over 50% of the federal budget is allocated to domestic debt servicing, based on the flawed belief that these payments help prevent boom-bust cycles. Yet, in both 2018 and 2022, it was external fuel price shocks—not domestic policy rates—that led to higher trade and current account deficits, former minister added.
