KARACHI: Business community on Tuesday rejected the increase in Export Finance Scheme (EFS) and Long-Term Financing Facility (LTFF) rates leby 200 basis points and policy rate by 150bps and appealed to governor of State Bank of Pakistan and Finance Minister to reverse the decision to save business & industries from collapse.
President of Federation of Pakistan Chambers of Commerce and industry (FPCCI), Irfan Iqbal Sheikh has expressed his profound disappointment and concerns over an anti-business and anti-growth hike in the key policy rate, i.e. 150 bps by the Monetary Policy Committee (MPC) of the State Bank of Pakistan. He said that the business, industry and trade community is shocked; and, clueless at the same time on how to cope with its fallout on economic activities, viability of doing business in Pakistan and its inevitable adverse impacts on exports – in the absence of any governmental support, incentives or facilitative mechanism for businesses.
He noted that the government’s monetary and fiscal policies are totally out of sync. As a result, economy will be adversely affected; including, business sentiment, industrial production, private-sector investment, exports, employment, revenue generation and economic growth.
Irfan Iqbal Sheikh emphasized that if the interest and export refinancing rates are not decreased drastically in Pakistan, we will not be able to compete with the regional countries as well. He explained that making formal and banking channels out of reach for businesses for their financing needs will give a boost to the informal economy and that will not be good for the country’s FATF blues.
He explained that the current tide of the inflation had nothing to do with the policy rate of SBP; but, it was due to the political uncertainty and lack of any direction in economic policies due to it. Additionally, he added, that the inflation in Pakistan has been due to supply-side disruptions and again had nothing to do with the interest rate.
President FPCCI elaborated that it was business community’s genuine demand, even before the recent interest rate raise, that the policy rate should be gradually brought down from 12.25 percent to ensure availability of capital to businesses at lower and affordable rates. Contrary to what was needed, the interest rate has now been hiked to 13.75 percent; which will put a halt to the economic and commercial activities in the country.
Outlining the real factors, Irfan Iqbal Sheikh said that volatile rupee-dollar parity, uncertainty in political & economic environment and interest rate hike will totally crush the SMEs; as cost of doing of doing business, ease of doing business, access to capital, access to foreign exchange and remaining profitable will all be next to impossible for SMEs.
He Sheikh said if the authorities do not interfere immediately, there will be a lot of bankruptcies, many export orders would not be fulfilled, huge loss of employment opportunities; and loss of tax revenue will follow. He has called upon the authorities to instantaneously start a consultative process with all the stakeholders to find a workable way out of the current crises.
President of Korangi Association of Trade and Industry (KATI) Salman Aslam while expressing concern over the hike in interest rates by SBP said that raising interest rates to 13.75% would lead to economic slowdown and consequently Unemployment and inflation will rise further.
He said that the people suffering from financial crisis could not afford further inflation and the government should keep the interest rates in line with the rates of other countries in the region.
Salman Aslam says growth rate in Pakistan has exceeded expectations. This is because on April 7 last month, the SBP announced an emergency monetary policy and raised interest rates by an extraordinary 2.5 per cent, bringing the interest rate to 12.25 per cent. The interest rate has reached 13.75%. Interest rates should be reduced to save industries from collapse.
Salman Aslam said that due to increase in interest rates, the process of industrialization in the country has come to a standstill while the running industries and cottage industry are also facing severe problems.
He said that in the present times, the industrialists are already facing severe difficulties in achieving the export targets due to increase in production cost, hence it has become almost impossible to do business at the current interest rate.
President Kati said that considering the ongoing political and economic crisis in the country, the decision of the SBP was very disappointing.
He said that the rise in interest rates by the SBP has created a wave of concern among the country’s traders and industrialists.
Salman Aslam said that a decision has been taken which will not be helpful to the industries nor will it be helpful in the current economic situation.
President Kati called on the Prime Minister to take immediate notice of the situation and issue directives to reduce interest rates for revival of industries and better performance.
He further said that the solution to the economic problems of the country lies in better performance of industries and establishment of more industries.
Saqib Naseem, Chairman Pakistan Yarn Merchants Association (PYMA), Muhammad Junaid Teli, Vice Chairman, Sind & Balochistan region, while expressing deep concern over the sharp rise in interest rates by 150 basis points (1.5%) to 13.75%, appealed to Finance Minister Miftah Ismail to reverse the decision to save business & industries from collapse, and gradually bring it to single digit to help deal with the severe economic crisis caused by the Covid-19 pandemic, and help domestic businesses & industries, especially SMEs, survive.
PYMA office-bearer said that the Covid-19 pandemic has already brought trade & industry to the brink of collapse, while the country’s current political situation has also put the business community in a difficult position, that they run or not their business.
They said that policies should be formulated in the economic interest of the country which would promote business and industrial activities, but the government is not concerned about trade, industry or the negative effects of anti-economic measures.
Saqib Naseem, Junaid Teli appealed to Finance Minister Miftah Ismail to support the business community in this hour of trouble and immediately reverse the decision to raise interest rates by creating conveniences instead of difficulties, and help get back on its feet.
Otherwise, neither business nor industry will survive. Therefore, the government should wisely formulate the best economic policies in consultation with the stakeholders so that the country can get back on the path of development.
Abdul Rashid, President, Site Association of Industry, Karachi, has rejected the increase in Export Finance Scheme (EFS), Long-Term Financing Facility (LTFF) by 200 basis points and policy rate by 150 basis points. The SAI president demanded the government immediately reverse the recent increase, saying that if the decision was not reversed, it would have a very negative effect on the country’s exports.
Abdul Rashid said that Pakistan is the only country in the region where interest rates are extremely high as raising the policy rate to 13.75% would destroy the economy.
He said, ‘’Due to excessive utility charges and taxes, the production cost of industries has already gone up drastically. Increase in EFS and LTFF interest rates by 200 basis points, including excess interest, will have a very negative effect on exports’’.
Abdul Rashid added that measures are needed now to take the country out of the economic crisis without affecting the economy and to formulate economic policies in consultation with the business community so that business and industrial activities can continue, otherwise there will be devastating effects on industries.
Copyright Business Recorder, 2022
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