The market fears yet another hike in the interest rate at the state bank’s monetary policy committee (MPC) meeting tomorrow (Tuesday) because it is widely interpreted as being part of IMF’s wish list for reviving the bailout program. And everything that fiscal and monetary authorities have said about IMF’s ‘prior actions’ since the successful completion of staff level talks recently points in that direction. Yet there’s still a lot of uncertainty because while the finance ministry has been pretty open about what has been demanded, or so we’ve been led to believe, the central bank has not. That’s not stopped the market from making its own deductions, of course, even if the confusion and uncertainty haven’t exactly helped. It is this very fear that has businesses unhappy about the prospect of yet more expensive money, as would be expected. That’s because not only does such tightening not gel at all with the government’s growth mantra, it’s also quite contrary to what they were led to believe at the time of the budget. And now that they’ve put plans, and investments, in motion are they simply supposed to pull the plug with nothing to show for it? January should also shed some light on just when the IMF’s executive committee will green light the next tranche of the Extended Fund Facility (EFF), without which the staff level agreement means nothing and which still requires a mini budget and legislation, which will have its own spillover effect. It seems there still some space between fiscal and monetary policies. The former is not yet done doling out subsides, even though the mini budget is going to change that in a hurry, and it’s still counting on retaining the growth cycle. The latter, however, is looking to cut money in circulation in the hope of arresting inflation and imports, neither of which has responded to such measures so far, with little to suggest they will even if the screws keep tightening. And moving these two wheels of the cart in opposite directions, especially when the local currency is in shocking freefall, is the one sure textbook way of ensuring stagflation in any economy. Too much fiddling with policy could well send us down that road. *