KARACHI: The country’s Value-added Textile Sector Friday showed disappointment over the latest abrupt increase in policy rate of 250 basis point to 12.25 percent by the State Bank of Pakistan, saying the sudden surge may have a “detrimental” effect on exports.
“Such an unexpected, rapid and heavy increase will bring detrimental effects on overall trade and industry as well as all segments of the economy,” Central Chairman, Pakistan Hosiery Manufacturers & Exporters Association, Shahzad Azam Khan said.
The sector is shocked and disappointed over recent abrupt increase in policy rate hike from previous 9.75 percent to 12.25 percent with a hefty increase of 250 basis points by the State Bank of Pakistan (SBP) which should have been contained at previous position in view of sensitive economic conditions and political wrangling in the country, he said.
The industry has expressed dismay over the unexpected move of the SBP to revise the policy rate upward without consulting the stakeholders while the government was also in jeopardy.
“Its repercussions will be harsh,” he warned that such a high and “irrational” increase was decided overnight has not been seen in the history.
The move of the central bank is widely feared to have “disastrous” effects on economy, industry and export, he said.
The entire sector urged the new government should intervene and bring policy rate back to single digit in the larger interest of the Pakistan to sustain and support the industrial activities and maintain inclining trend in exports, he added.
Similarly, he said, the enhancement in Export Finance Schemes (both Part I & II) previously from 2.50 percent for SMEs and 3.50 percent for non-SMEs to 5.5 percent, whereas the bank-spread is additional, has also widely spread discontentment amongst the exporters.
“The SME exporters are highly upset and saddened over this ‘anti-export and anti-economy’ move which will increase liquidity pressure and will also hamper their export efficiency,” the PHMA central chairman said.
The new government should step up with a serious notice of the sudden “unwelcoming” and “unjustified” move of the SBP and bring back the policy and EFS rates to their previous positions or further downward, he said, if possible.
Shahzad Azam Khan termed the recent moves of the SBP to enhance policy rate to control inflation as “unwise and unjustified” as such “futile” exercise have been fruitless in the past.
He also expressed concern over increasing rupee versus dollar parity, seeking the government’s attention to the issue.
“The business and industrial community is worried over political uncertainty and unrest, nonetheless, the new government is formed but the immediate measures are required to augment economy to avoid any big economic turmoil on war-footing basis,” he said.
PHMA Chairman also urged the coalition government to stick to the “Charter of Economy” for the country’s betterment.
“The local industry and trade were already facing various challenges in the post COVID scenario, liquidity crunch and other financial hardships. In the current outlook, such exorbitant increase in policy rate will bring devastating impact and will put a fatal blow on the local manufacturing industry,” Shahzad Azam Khan said.
Prime Minister Shahbaz Sharif and his economic and financial team should take immediate notice of the genuine demand of the business community to reverse the policy discount and EFS rates.
Copyright Business Recorder, 2022
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