ISLAMABAD: Speakers at a consultative meeting on Wednesday warned the government that the highest-ever inflation may lead to widening inequality in Pakistan and urged for evidence-based monetary policy to ensure economic justice.

Keynote speaker Mirco Günther, Head of Friedrich Ebert Stiftung (Asia & Pacific), said that think tanks can play a vital role in the formulation of a monetary policy that may support governments in the provision of social and economic justice. He was speaking at a consultative meeting titled, “Evidence-based Advocacy on Policies for Economic Justice and Deve­lopment”, organised by SDPI and Friedrich Ebert Stiftung (FES).

Mr Günther warned that Pakistan has been confronted with inflation for a long time, which may lead to higher inequalities. He also stressed the need for aligning price stability to thrive socio-economic justice in society.

SDPI Deputy Executive Director Dr Sajid Amin presenting the findings of the report, “Monetary Policy for All”, suggested that SBP should set 5pc inflation target for the next few years as lowering inflation targets without proportional wage increase shrinks purchasing power of the common person and hinder economic justice.

He further suggested maintaining less than 5pc inflation target for the informal sector as it is more vulnerable to economic shocks. He recommended improving the regulatory framework of commercial banks for increasing financial inclusion as 92pc of their operations are centered around bigger investors, which leads to higher informal borrowing.

He highlighted various future endeavours to bring social impacts of monetary policy including quarterly social justice watch, presenting flagship reports on policies for economic justice and scaling up this work to the regional level.

Ali Kemal, Chief of SDGs Support Unit, Ministry of Planning Deve­lopment & Special Initiatives, said that interest rate is “the income of capitalists” and social inequalities are exacerbated by interest rate hikes as it contributes to inflation and stressed aligning inflation targets for social justice in fiscal policy after consultation with the central bank rather than solely based on political interests.

He emphasised increasing financial services for Small and Medium Enterprises (SMEs) through commercial banks and tapping the potential of digital currency which is neglected in Pakistan.

Executive Director SDPI Dr Abid Q. Suleri, warned of the impacts of the triple-C crisis on countries like Pakistan which according to him will be compounded by energy inflation. In this case, he said, economic inequalities will increase, and energy will either be inaccessible or unaffordable. He called upon the government to come up with evidence-based policy solutions to provide economic relief to the public while at the same time satisfying the International Monetary Fund.

Published in Dawn, November 10th, 2022