Businessmen criticise SBP for announcing a raise of 50 basis points (bps) to 13 percent in key policy rate and termed it a highly unwise move that would prove more harmful for the economy. Malik Asrar Ahmed Awan, President Multan Chamber of Commerce and Industry (MCCI), while talking to newsmen, said that they had been demanding single digit interest rate to promote private sector investment and stimulate the economy.
However, instead of bringing it down, SBP has further enhanced the interest rate, which will slow down the growth of private sector, despite the fact that the private sector is considered the engine of growth for an economy. He said that the SBP had claimed to control inflation by enhancing policy rate. However, this contention is not based on facts because a hike in interest rate will push the inflation rate further up, putting more burdens on businesses and the common man. He said that this move of the government would hamper new investment, industrialisation and expansion of businesses, as it will further enhance the cost of doing business in the country.
He said that the upward revision in the prices of electricity, gas and POL products had already adversely affected the businesses and industry and that this hike would create more problems for entrepreneurs, as it will deprive them of affordable financing.
Asrar Awan said the increase in interest rate will also affect the tax collection target of the government as the contraction in business activities triggered by high credit cost will lead to less business income and less tax revenue. He emphasised that banks should be asked to provide easy loans to the entrepreneurs so that private sector could grow fast and steer the economy out of the current troubles.
Awan said it would have been better if the government had curtailed the policy rate to single digit. There is a need to make drastic cut in the interest rates to turn the economy around and enhance industrial productivity which was at its lowest ebb due to multiple reasons, including acute energy shortage." The Multan Chamber of Commerce and Industry has said that it would hit the overall economy hard as the availability of equity to the business community has been made dearer with one stroke of pen. The MCCI President Asrar Awan said that the State Bank of Pakistan has adopted a wrong way of dealing with inflation. He said that the cost of doing business has been increased that would ultimately hit the economic growth that has just started showing signs of recovery.
He said at this point in time when both the trade and industry were in dire need of some special package, the increase in interest rate would prove only counterproductive to economic recovery.
Meanwhile, Syed Muhammad Aasim Shah, leader of Value-Added Textile Forum and member standing committee on textile, Federation of Pakistan Chamber of Commerce and Industry has said, "we have rejected the recent increase in the mark-up rates announced by the State Bank of Pakistan in its monetary policy recently.
He said that Export Running Finance (ERF) was already increased by State Bank by the first half of this calendar year. It is worth mentioning that textile industry is passing through the worst time because of the law and order situation of the country. He said the recent policy announced by state bank is creating a negative impact on the textile policy. Textile sector specially value added textile sector urged the concerned authorities of Ministry of textiles, Trade Development Authority of Pakistan and also the Ministry of Commerce to look into the matter and resolve this important issue and instruct State Bank to revise and decrease the mark up rates for exports at least to the same level where it was when the textile policy was announced.
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