High Interest Rate, Weak Currency: The Perfect Recipe for Economic Disaster

Byline: SHAMSUL GHANI During the current decade, financial years 05, 06, 07, and 08 were the hey years for investment in Pakistan. During these years, national savings too maintained a decent range of 17-18 percent of GDP, except for the FY-08 when unprecedented hike in global food and commodity prices made a heavy dent in peoples' disposable incomes restricting their capacity to save. On investment side, the high interest rate and a sliding rupee combined to adversely affect investment activities as the investment ratio declined from 22.1 percent of GDP in FY-08 to 19 percent in FY-09 and then to 16.6 percent in FY-10.