KARACHI: Industrialists have rejected 1.5 per cent hike in interest rates and demanded its reversal.
President of Korangi Association of Trade and Industry (KATI) Salman Aslam while reacting to SBP’s interest rate hike to 8.75 percent said that the rapid rise in monetary policy will affect the economy.
The export industry was facing difficulties due to high production costs. In such a scenario, a sudden increase of 1.5 percent in interest rates would further increase the cost of production. Industrialists would get expensive loans from banks which would affect the industry.
He said that the monetary policy was expected to increase by 50 to 100 basis points, but the unexpected decision by the SBP has raised concerns among the industrialists.
President Salman Aslam said that increase in exports was essential for the recovery of the economy for which cheap loans were of utmost importance. However, due to increase in trade deficit and inflation, the monetary policy was tightened.
He said that the industrialists were ready for all possible cooperation with the government to control inflation. The government should ensure cheap loans for the export sector so as to increase exports, foreign exchange reserves and strengthen the value of the Pakistani rupee against the US dollar.
He appealed to the government to reduce interest rates to 8 percent so that loans could be cheaper, and Small and Medium Enterprise s (SME) continue to use their full potential.
However, President Site Association of Industry, Abdul Rashid said SBP-raised interest rate to 8.75% will hamper industrial growth. He said that rising interest rates will reduce industrial production and it will not benefit the economy but instead harm it. He said business and industry will face more difficulties due to higher interest rates. He demanded of SBP to withdraw interest rate hike in the best interest of trade and industry.
In the recent Monetary Policy, market was not expecting such a high jump. This expected jump of 1.5 % may be due to ‘IMF’s dictation’ as they are loan sharks, MPC / SBP announced increase in key policy rate by 150 basis points to 8.75% said Ateeq ur Rehman, economic & financial analyst.
He was afraid that the cost of credit will be more expensive as SME financing and micro financing will be more expensive. The access to finance has become a hard nut to crack for small businesses.
The increase in policy rate will increase the cost of manufacturing by 1.5 to 2%, eventually increasing the cost of commodities. Today inflation is mounting to 18.34%; therefore, it is expected to touch new heights, he said.
He further said that the GDP Growth target by 5% is getting unattainable. Investment will further slow down and savings will see no improvements. We are a debt -burden country with an estimated external debt of USD 125 billion,” he said adding by this increase in policy rate, the debt will further grow up to Rs.300 billon, which is a mega burden. He requested SBP and the Ministry of Finance to revisit and frame a rate up to 3 to 4 % as in the region; it is like 4.4% in Bangladesh and 2% in Thailand.
Copyright Business Recorder, 2021
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