PESHAWAR, May 24: Pakistan Muslim League-Q Senator Salim Saifullah Khan has criticised the recent increase in interest rate by the State Bank and claimed that it will have a negative impact on economy.

In a statement issued here on Saturday, he said the step had been taken at a time when the global and national economy was faced with financial crisis. “Developed countries have lowered the interest rate to avoid the emerging recessionary trend in the global economy,” he observed.

He said the rise in interest rate would affect production in major sectors. He said it would increase the cost of production, causing rise in prices of essential commodities. He said the increase would wipe out the already low margin of profit in small business and discourage trade and industry, resulting in unemployment.

“Islam forbids interest on loan and it will be appropriate if only service charges of 2.5 per cent are levied on bank loan,” he said

Disagreeing with the opinion that the increase in interest rate was necessary to curb the unfavourable trend in the stock market, he said the problem could be tackled to some extent by imposing tax on stock brokers who were earning billions of rupees.

He said raising the interest rate to stabilise the stock market was an imprudent policy which would affect both foreign and domestic investment.

The senator said it would intensify depreciation of local currency against the US dollar and other major currencies. He said the quantum of foreign debt would go up.