The Lahore Chamber of Commerce and Industry (LCCI) has urged the State Bank governor to take immediate measures to decrease the mark-up since the high interest rate was not only creating troubles for industrial concerns but also making Pakistani goods uncompetitive in the global market.
LCCI Acting President Yaqoob Tahir Izhar and Vice President Mubasher Sheikh said in a statement issued here on Tuesday numerous industrial concerns had already closed down their operations because they were unable to pay back loans they got on low interest rates.
They said that there was hardly any check on the banking sector making a huge profit at the cost of economy and the masses, thus pushing the economy to the wall. They said that internationally the banking spread was between 1.5 percent to 2 percent maximum while in Pakistan the spread was 7.5 percent.
The profit of some big banks as declared by them has now crossed the mark of Rs 100 billion. They said that only because of the high mark-up nobody was ready to set up a new industry, making Pakistan a trading country instead of manufacturing hub.
LCCI office bearers feared that if the situation remained the same for some time, the unemployment could touch alarming levels and urged the State Bank governor to look into the matter. They said the bank should put a cap on the interest rates, as boost to exports was the only way to control the fast-widening trade deficit, which was $12.5 billion in 2005-6 and 13.5billion in 2006-7.
They also suggested that the bank consult with chambers in the country to evolve long-term policies to extend business loans since numerous businesses had already fallen victim to short-term and adhoc policies. They said the mark-up rate on long, short-term industrial loans had reportedly registered a huge increase extending these loans at 16 to 18 percent, which earlier were available on 10 to 12 percent. They said in this period financial institutions made a huge profit at the cost of industrial segment of the society.
The office-bearers also said when China was extending loans to its industry at 4 to 5 percent mark-up how Pakistani industrialists could compete them in the global market. They said the markup rate was increased under the pretext of high inflation while controlling the inflation was never the job of industrialists but purely the government's. While quoting the example of GDP growth in China and India, the office-bearers said the government should provide level-playing field to Pakistani manufacturers so that they could be able to earn much-needed foreign exchange for the country.