President Karachi Chamber of Commerce & Industry (KCCI) Shamim Ahmed Shamsi has criticised the recent increase in SBP key discount rates to 12.0 percent from 10.5 percent and imposition of 35 percent Letter of Credit (L/C) margin on imports.
He apprehended that the efforts to arrest current inflationary trend through higher interest rates would not yield desired results. He said the decision to increase discount rate and imposition of L/C margin will have a negative impact on economy. The SBP's effort to control inflation through higher interest rate is likely to fail like its earlier attempt as inflation in the country has been caused by soaring oil and food prices, which are not affected by increase in interest rates.
He added, "Source of inflation in Pakistan is certainly not local as credit disbursement to the industrial sector is already on the decline. The industry is under immense pressure and is finding it hard to stay afloat. Now the industry has to pay mark-up on the margin, which will increase the cost of production The step taken by the SBP to stem inflation have actually resulted in pushing it further up. There is a need to check the overall system that has been responsible for inflation".
The KCCI President maintained that the 35 percent L/C margin would ultimately push up the cost of raw material used in the manufacturing, thus making the local products uncompetitive in the foreign as well as in the domestic markets and would result in closure of industry, increase in unemployment which will further aggravate law and order situation in the country.
"We understand these are anti-industry steps and would cause severe problems to the industry, as major industries including textiles are depending on the import of raw materials," he added. Shamsi urged the SBP to take measures to slash down mark up rate as well as export refinance rate to reduce cost of doing business and increase competitive edge of our products.-PR