LCCI urges SBP to reduce discount rate

The Lahore Chamber of Commerce and Industry (LCCI) on Thursday urged the State Bank of Pakistan to pave way for new investments in the industrial sector by reducing the discount rate in the upcoming monetary policy.
LCCI President Ijaz A Mumtaz said although the bank is making the right moves by reducing the discount rate in the last monetary policy but that is not enough to give a breathing space to the industrial sector. He said a notable cut of at least two percent in the discount rate would inject fresh blood to the industrial sector which is facing several internal and external challenges.
He said the bank's positive initiative would also make the Pakistani products competitive in the international market as fluctuation in discount rates controls the industrial input cost.
"This fact should be an eye opener for the policy makers that Japan, Sweden and Switzerland are aiding their industrial sector at zero percent discount rate as compared to 9.5 percent in Pakistan," he mentioned.
He further said the benchmark interest rate in Pakistan was last recorded at 10 percent and that the interest rate in Pakistan averaged 12.55 percent from 1992 until 2014, reaching an all time high of 20 percent in October 1996 and a record low of 7.50 percent in November 2002.
He said the bank had to cut the interest rates keeping in view the ground realities and strict competition in the international market and that a cut of 50 to 100 basis points would never do any service to the challenged economy.
"It is very unfortunate that we have failed to learn any lesson from the tighter monetary policy stance adopted by the State Bank of Pakistan in the yester years," he said. "The ongoing economic scenario shows that there is hardly any time left for economic managers of the country and they all should understand well that a 50 to 100 basis point cut will be too little. It is now before all of us that high mark-up rate is no more sustainable. It has been causing a great harm to economy and would continue to do so unless and until a realist approach is adopted," he added.
He urged the bank to announce at least 200 basis points cut in the markup rates that would certainly give jumpstart to the economic activities in the country.