LAHORE: Prime Minister Imran Khan on Thursday promised to consider a proposal to offer low-cost credit for the purchase of machinery and equipment to encourage industrial capacity expansion and stimulate new investment in the country.
During a meeting with a group of businessmen that also included representatives of traders, the premier responded positively to the proposal from Lahore Chamber of Commerce and Industry president Almas Hyder to look into the possibility of creating a credit line to provide loans to the industry at a subsidised rate of six per cent for purchasing machinery and equipment. He said he would discuss the idea with State Bank of Pakistan Governor Reza Baqir next week, according to the participants of the meeting.
The businessmen have already put on hold their expansion and investment plans amid rising interest rates and depreciating currency over the last one and a half years. The private sector credit growth is reported by the central bank to have decelerated to 11.4pc in the last fiscal year from 14.8pc a year earlier because of ongoing monetary tightening. This is in spite of increased working capital requirements of the industry in a high inflation environment.
In its first monetary policy statement on Tuesday, the first after the approval of $6 billion bailout by the IMF executive board on July 3, the central bank raised its benchmark discount rate by 100 basis points to 13.25pc. The bank has hiked the policy rate by 750 basis points since early 2018 in its struggle to control inflation and current account deficit. The rupee has lost almost a third of its value in the last one year.
The prime minister was hopeful that the central bank would start easing monetary policy as inflation declines. “I hope that the interest rates will start decreasing in the next four to six months,” he was quoted to have told the businessmen who suggested that the government shouldn’t wait for the rates to drop and instead take immediate measures to stimulate industrial investment by offering cheaper credit for capital expenditure to those who plan to expand capacity or set up new projects.
Mr Khan reiterated his government’s resolve to implement new tax measures announced in the budget for the present year, urging the traders to register themselves under the sales tax law as the economy couldn’t be stabilised and growth revived without increasing tax revenues.
Published in Dawn, July 19th, 2019