Dr Mirza Ikhtiar Baig has strongly criticised Governor State Bank for her further tightening up the monetary policy for the consecutive increase in the discount rates to 10 percent and reducing State Bank contribution by 30 percent towards export refinance schemes for exporters.
He on behalf of FPCCI and as Chairman Pakistan Denim Manufacturers and Exporters Association (PDMEA) met Dr Shamshad Akhtar Governor State Bank of Pakistan along with other exporters and senior bankers on Thursday at SBP head office. Dr Baig has also provided the Indian central bank notification, in which Indian government has reduced interest by 2 percent to its exporters.
He categorically put on record that due to increase in the discount rate the average landing rates of the banks would further increase by 2 percent, which the industry cannot afford in the present competitive scenario.
The textile industry is already facing severe crisis and struggling to compete with our regional competitors, therefore textile industry has not met the exports target due to increase in cost of doing business, increase in the financial cost is the major factor, and this will further increase our trade gap, he said.
Dr Baig was also disappointed with State Bank's decision to reduce its contribution for export refinance scheme to 70 percent from 100 percent as the balance 30 percent export refinance is to be arranged by the banks from their own resources. Dr Baig further informed the Governor State Bank that exporters are not in a position to reduce their export refinance liability by 30 percent by 30th June 2008.
He said that Pakistan's regional competitors has given additional incentives to their exporters like India has just reduced mark up on pre-import shipments by 2 percent with effect from 12th July 2007 in addition to increase in their duty drawback rates by 10 to 40 percent etc.
Dr Baig also disagreed that the tight monetary policy is the only remedy and tool to curb inflation. In this respect, he said, our inflation is the food items, which can only be contained by maintaining demand in supply mechanism of the essential food items.
"Higher mark up has given adverse effects on Pakistan's industry and economic growth which is witnessed by 38 percent less import of textile machinery, "he said. He feared that if State Bank does not review its present monetary policy of increasing the mark up rates to an unbearable level, majority of industry will collapse. Dr Baig urged State Bank of Pakistan also look from industry's perspective particularly exporters otherwise closure of industries would result serious unemployment problem in the country.-PR