Evidence-based monetary policy imperative for socio-economic justice: Experts

ISLAMABAD, Nov 09, (SABAH): Mirco Günther, Head of Friedrich Ebert Stiftung (Asia & Pacific), has said that think tanks can play a vital role in the formulation of an evidence-based 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”, organized by SDPI and Friedrich Ebert Stiftung (FES) here on Wednesday.

Mirco 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 the society.

Dr. Abid Qaiyum Suleri, Executive Director, SDPI warned of impacts of 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 public while at the same time satisfy the International Monetary Fund (IMF).

Dr Vaqar Ahmad, Joint Executive Director, SDPI said that unpacking various forms of inequalities is a common global challenge, which will worsen amidst global stagflation, energy crisis and conflicts. He expressed that strong collaborations between organizations like SDPI and FES can play a pivotal role in finding evidence-based solutions to such challenges. He stressed the need for increasing public knowledge of monetary policy to enable them to demand better from political parties and influence inclusion of economic justice in party manifestos as 2023 is the election year.

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 on aligning inflation targets for social justice in fiscal policy after consultation with central bank rather than solely based on political interests. He emphasized on increasing financial services for Small and Medium Enterprises (SMEs) through commercial banks and tapping the potential of digital currency which is neglected in Pakistan.

Benjamin Reichenbach, Policy Officer for Pakistan, FES said that FES has been organizing conferences and other platforms to open space for dialogue to support sustainable development, which is a common objective between SDPI and FES. He informed that SDPI and FES’s work on social footprint of monetary policy is first of its kind and elaborates the social implications of monetary policy on social development of Pakistan.

Dr. Sajid Amin, Deputy Executive Director, SDPI presenting the findings of the report, “Monetary Policy for All”, suggested that SBP should set 5% inflation target for next few years as lowering inflation targets without proportional wage increase shrinks purchasing power of common person and hinder economic justice. He further suggested maintaining less than 5% inflation target for informal sector as it is more vulnerable to economic shocks. He recommended improving regulatory framework of commercial banks for increasing financial inclusion as 92% 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 report on policies for economic justice and scaling up this work to regional level.