LAHORE: Punjab’s industry, which is reeling under rising cost of doing business because of energy shortages, has made a call for substantial reduction of 150 basis points (bps) in the interest rate on the eve of the announcement of the new monetary policy statement by the State Bank of Pakistan (SBP) on Saturday.

Most financial analysts expect the SBP to continue pursuing a cautious monetary policy, cutting its policy rate by 50bps to 9pc despite a massive plunge in the headline inflation which stood just above 4pc last month and a little over 6pc during the first half of the present financial year until December.

“The formidably high interest rates and energy shortages facing the textile industry for the last seven years have kept the manufacturers from creating new jobs and replacing their aging technology, adversely affecting competitiveness and exports,” said All Pakistan Textile Mills Association (Aptma) chairman SM Tanveer during a joint briefing with group leader Gohar Ejaz on Thursday.

“The meaningful reduction of 150bps in the policy rate would at least help the manufacturers somewhat cut their financial cost as well as invest in new jobs and energy projects,” Mr Tanveer argued.

“When was the last time the industry in Punjab had created new jobs? Energy shortages and credit costs did not allow it in seven years. Low interest rates are one major prerequisite for boosting investment in the manufacturing. If the bank can raise rates in anticipation of inflation, it should also cut the credit cost in anticipation of declining prices,” he added.

Gohar Ejaz said the average inflation in the first six months of this fiscal had averaged 6.1pc and 4.12pc in November and December, respectively. It means that the bank had huge room to pull down its policy rate, he argued. The reduction in the petroleum prices and electricity rates as already announced by the government would further pull down headline inflation and inflationary expectations expanding the space for the SBP to significantly cut its discount rate down to regional average of around 7pc, he contended.

Mr Ejaz pointed out the Central Bank of India had already brought down policy rate by 25bps days before it plans to release its monetary policy next week.

“The cost will further be reduced by India at the time of announcement of the policy. This shows that India’s central bank is trying to boost growth and investment of $56b in the textile industry. It is time we also help our textile industry to boost exports and narrow trade gap,” he contended.

“We are not asking for subsidies. We are just asking the government and SBP to hold our hand so that we can walk this country and its people to prosperity and fast growth trajectory,” Mr Ejaz argued.

Governor: Governor Chaudhry Sarwar will soon take up with the federal government the issues being faced by the business community.

During a meeting with a two-member delegation of the Lahore Chamber of Commerce and Industry (LCCI) at Governor House here on Thursday, Sarwar said tax procedures should be simplified, untaxed sectors be taxed while there must be a comprehensive strategy to deal with under-invoicing, smuggling and high rate of taxes.

He also agreed to patronise the OIC Ambassadors Conference 2015 being arranged by the LCCI and assured to extend every possible help for the cause of the mega event.

The governor said the Punjab government believed that the OIC conference would boost business among the Muslim countries.

Earlier, LCCI Senior Vice-President Mian Nauman Kabir and Vice-President Syed Mahmood Ghaznavi apprised the governor of the issues being faced by the business community, including energy crisis, law and order situation, complicated taxation system, SRO 608 and petrol crisis. They also gave a detailed briefing to the governor on the OIC conference.

Published in Dawn, January 23rd, 2015

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