Lahore Chamber of Commerce and Industry demanded at least two percent further reduction in the banks' mark-up rates from 12 percent to 10 percent to give quantum jump to the national economy. Banking sources told Business Recorder that the State Bank of Pakistan is likely to reduce the current 12 percent interest rate tomorrow (Wednesday).
It had already reduced the discount rates since July 2011 bringing it down from high 14 percent to 12 percent. Talking to Business Recorder here on Monday LCCI President Irfan Qaiser Sheikh said that further reduction in bank discount rate could only be the way forward for all sectors of economy to survive and contribute to the national exports.
Sheikh said that the single digit interest rate would revive the sick and closed down industrial units resulting into more employment opportunities for the workforce and control the inflation at a rapid pace as this would lower the cost of credit for the private sector in Pakistan. He said that the credit availability to the local industrialists and exporters at the regional competitive mark-up rate of 8.50 percent would increase Pakistan exports.
He said since the government is the biggest borrower, the fall in the domestic interest rate would also improve its working and financial health. He demanded that the government should minimise its borrowings from the banks so that more loans are offered to the private sector for running the industries and generation of jobs for the unemployed people.
Vice-Chairman, FPCCI textile committee Mian Faraz Alam said that high discount rates in Pakistan as compared to other regional countries have discouraged the private sector therefore any cut in the mark-up would enable the industry to make short- and long-term investment in the textile sector.
He said that the present 12 percent bank mark-up is still high in Pakistan that should be brought down to single digit at the earliest interest to improve the competitiveness of the domestic industry. Another financial expert Samiullah Durrani said that 2 percent cut in the discount rate during past five months had improved the government's financial liquidity position and enabled it to control electricity load shedding by paying to IPPs for electricity generation. "The government entities like Pakistan State Oil, Pakistan Steel Mills, PIA and Pakistan Railways have also benefited from the interest rate reduction", he added.