Site Association of Industry (SAI) has raised its concerns on rising domestic inflation due to high government borrowing from State bank and commercial banks. The industrial economy of the country is already struggling with rising global commodity prices, energy shortages and ever worsening law and order situation.
This was stated in a joint statement by its Chairman Abdul Wahab Lakhani, Senior Vice Chairman, Asad Nisar and Vice Chairman Sanaullah Abdullah. High government borrowings have discouraged the banking sector to lend to the industrial enterprises. Higher banking spreads and liquidity crunch is the result of increased government lending to overcome fiscal deficit. They blamed losses of 300 billion by State Owned Enterprises (SOEs) and mismanagement by economic and political managers for increased budget deficit. This inflationary trend has compelled the central bank to increase policy rates by 150 basis points in the past five months, which is hampering industrial growth of the country.
On a positive note it's the increasing exports in value terms and expatriate remittances, which is supporting the current account and saving the country from potential external shocks.
They urged the government to plan for immediate reduction in deficit of SOEs or its transparent privatisation and widening of tax net by bringing in sectors like agriculture and real estate. This will significantly reduce government borrowing and will give relief to the industrial sector, which is a key employment generator and foreign exchange earner. Considerable reduction in key policy rate is also the need of the hour to stimulate the industrial sector, they further added.-PR
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