Dr. Gohar Ejaz Criticizes Interest Rate Hikes Amid Fuel-Driven Inflation in Pakistan

Dr. Gohar Ejaz, Chairman of the Economic Policy and Business Development think tank and former caretaker federal minister, has raised serious concerns over Pakistan’s reliance on monetary tightening to control inflation, arguing that recent interest rate hikes are ineffective against fuel-driven price pressures.

In a statement issued on Wednesday, Dr. Ejaz said the recent 100-basis-point increase in policy rates by the State Bank of Pakistan would not help contain inflation, as the primary driver remains volatile international fuel prices influenced by global conflicts and supply disruptions.

He argued that monetary policy tools are limited in addressing imported inflation, stressing that higher interest rates cannot influence global commodity markets or reduce fuel prices domestically.

Citing Nobel Prize-winning economist Joseph Stiglitz, Dr. Ejaz said supply-side shocks particularly in energy and commodities are not effectively addressed through monetary tightening.

“Such policies risk slowing economic activity without providing relief to consumers,” he noted.

He also questioned whether higher borrowing costs could meaningfully reduce fuel consumption or affect international price trends, stating that the answer to both was “clearly no.”

Highlighting fiscal pressures, Dr. Ejaz warned that every 1% increase in interest rates adds roughly Rs600 billion to Pakistan’s annual debt servicing burden. He noted that debt repayments are already projected to exceed Rs8 trillion this fiscal year.

“This additional burden will ultimately translate into higher taxes and greater pressure on citizens already facing inflation and stagnant incomes,” he said, adding that the situation reflects a broader fiscal and structural challenge.

Dr. Ejaz urged policymakers to shift focus away from repeated interest rate hikes and instead pursue supply-side reforms, energy sector restructuring, and measures to boost domestic production.

He said that without addressing structural inefficiencies and external vulnerabilities, monetary tightening would continue to slow economic growth without stabilizing prices.

The remarks come amid ongoing debate over Pakistan’s macroeconomic strategy under its IMF-supported programme, where balancing inflation control with economic growth remains a key policy challenge.

BusinessPakistan OMC Sector Profit Surges 130% to Rs52.9bn in 9MFY26By Sabica Tahira|4 hours ago |2 min readPakistan’s Oil Marketing Company (OMC) sector posted a 130% year-on-year increase in earnings during the first nine months of FY26, with total profits rising to Rs52.9 billion compared to Rs22.9.

Air Link Communication Limited (PSX: AIRLINK) has entered Pakistan’s growing Buy Now Pay Later (BNPL) market through the launch of a wholly owned subsidiary, marking a.

BankingPC Board Recommends Transaction Structure for Privatisation of ZTBLBy M Ali|5 hours ago |2 min readThe government of Pakistan has approved a transaction structure and restructuring plan for the sale of Zarai Taraqiati Bank Limited (ZTBL), the state-owned agricultural lender,.

Prime Minister Shehbaz Sharif said Pakistan’s weekly oil import bill has surged to $800 million, up from around $300 million before the Gulf war, as rising global fuel prices.