LAHORE: The business community has termed a considerable cut in policy rate ‘a panacea for low investment phenomenon’ and urged the State Bank of Pakistan governor to review all other economy-related banking policies.

While the All Pakistan Business Forum (APBF) said the SBP decision to cut interest rate by 100 basis points would help stimulate private sector growth, the Lahore Chamber of Commerce and Industry said it would also bring down the inflation rate.

APBF newly-elected President Ibrahim Qureshi, however, called for measures to overcome energy crisis, security challenges and political instability to make interest rate cut meaningful and result-oriented.

He said the cut in policy rate would provide elixir to grappling economy to some extent and better prospects for investment climate besides financial relief to industrialists especially exporters.

Mr Qureshi said the downward revision in policy rate would create liquidity for the industry, which was already braving high cost of energy.

It would provide help to the exporters in the competitive international market besides growing productivity level, said Mr Qureshi and added that the industry had asked the SBP to reduce 200 basis points this time but even half of that relief would be highly welcomed by the business community particularly the industry.

“The industrial sector in Pakistan is still uncompetitive as compared to the countries like Japan, Sweden and Switzerland in international market where industry is being financed at zero per cent interest rates. In Austria, Belgium, Canada, France, Germany, Greece, Hong Kong, Italy, Malaysia, Singapore, Spain, Thailand, United Kingdom, United States and even India interest rates are very low,” said the APBF president and added higher rate never helped the government in reducing imports of oil, food, raw material and essentials while it reduced growth and savings, triggered unemployment and made imports costly.

This step would help control unemployment and expansion plans of the industry and it would be better if mark up would come to 7-8 per cent, said Mr Qureshi.

Meanwhile, LCCI President Ijaz A. Mumtaz, Senior Vice President Mian Nauman Kabir and Vice President Syed Mahmood Ghaznavi called for measures to make interest rate cut meaningful and result oriented. If other economic factors were not taken, they would continue to create problems for the economy in general and for the private sector in particular.

“It was longstanding demand of the Lahore Chamber of Commerce & Industry that markup rate should be at the lowest to provide some breathing space to the industry,” said the LCCI office-bearers in a statement.

However, they hoped that in the upcoming monetary policy, the interest rates would further be lowered to 7pc.

The LCCI office-bearers said the provision of ample cheaper liquidity was a must to create new businesses but in the last five years the higher interest rates kept the private sector growth at the lowest ebb causing huge damage to the businesses and unemployment graph also witnessed an unusual surge.

Published in Dawn January 27th, 2015

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