I'm setting up monit to monitor vps and when I add pem file, monit said that it does not have permissions so should I change pem file permission to 700?
Permission 700 is not needed to .pem file since it says the .pem is executable to the owner (besides being readable and writable). Pemission 600 means just read/write to the owner.
Your monit might be running as a different user (not the owner of the .pem file) so it has no permission. Remember that you .pem file may contain your private key and you don´t want to "others" have access to it, so open permission to others read the .pem file may be a secure breach. If you choose to go forward you can:
*This solution may cause other problems if application that use .pem file checks for permissions (like ssh do).
Ask yourself if this is really necessary.