LAHORE: The Federation of Pakistan Chamber of Commerce and Industry (FPCCI) has called on the government and Monetary Policy Committee (MPC) to immediately reduce interest rates by 400 basis points (bps) in its forthcoming meeting.
While addressing a joint press conference here on Friday, FPCCI President Atif Ikram Sheikh and S.M Tanveer, United Business Group (UBG) Patron in Chief, demanded an immediate four percent reduction after the fall in the inflation rates, adding that the inflation has come down to 9 percent.
They averred that bank loans are an important source of funding for small businesses, but many of them do not have access to bank loans due to high mark-up rates. They pointed out that in a low interest rates environment the cost of borrowing remains low, which gives a boost to the demand for credit and subsequently, increases economic activity. “To sustain economic growth, it is imperative to maintain high growth in industry and trade, and for this, the interest rate should be appropriate,” they added.
They observed that high interest rates and depreciation of the rupee were severely affecting the businesses, adding that the policy rate cuts announced over the last two monetary policy meetings were too little, too late. “Hence, the interest rates should be reduced immediately to reduce the cost of doing business, enabling the Pakistani exporters to compete in the international and regional markets,” they added.
They told the media that the federal government has borrowed Rs 50 trillion (from the domestic banks), and in return the banks were charging 20 percent mark-up on these loans, which amounts to around Rs 10 trillion, adding that in the recent budget, the government had allocated Rs 9.8 trillion for its payment. “If the government slashed the interest rates by 50 percent then the government could save Rs 5 trillion. What was deterring the government from taking this step? The government could save money from Independent Power Projects (IPPs) as well, but unfortunately, it was not doing so,” he added.
They also urged the government to resolve the issue of IPPs immediately; the task force formed for this should take its decision without a delay; otherwise, Pakistani exports would face huge losses. “The price of electricity should be reduced for the industries and the common man; it was not possible to run industries at the current interest rates and electricity rates,” they said, adding that if the government make savings after taking prudent steps, the electricity rates will come down, industries would revive and the people will get jobs.
Copyright Business Recorder, 2024