KARACHI: The Pakistan Business Council (PBC) has called upon the State Bank of Pakistan (SBP) to cut policy rate by 200 basis points to help reduce business costs in the wake of economic slowdown caused by the coronavirus pandemic.

“A policy rate of 13.25 per cent for a non-demand-pull inflation of 5.5pc is not justifiable. To make a meaningful impact on business cost, a 200bps immediate reduction is necessary. It should then be followed by further reductions,” said PBC Chief Executive Ehsan Malik in a press release issued on Monday.

The proposal to cut rates is one of the eight recommendations shared by the representative body of local and foreign investors to help mitigate the impact on the country’s economic output due to the pandemic.

The council also urged the central bank to “consider formalizing an emergency fund to bail out borrowers with an otherwise good record of performance.”

In addition, the council has asked the government to revise country’s fiscal year tax collection targets agreed with the International Monetary Fund (IMF).

“The government should immediately commence talks with the IMF to arrive at realistic targets and seek time and resources for institutional reforms of the FBR. With its current capability, the FBR is forced to pursue more tax from those already paying a disproportionate amount,” said the press release.

Challenging the imposition of 100pc LC margin requirement on imports, the council has asked the government to discontinue the margin requirement for industrial inputs to revive production.

In addition, the PBC has also advised the government to immediately release tax refunds and rebates to improve liquidity of the export-oriented sectors.

Moreover, Malik said the government should review the Export Finance Scheme to help insulate exporters from the shipment delay requests due to widespread closures in the major export destinations.

He also asked the government to consider tax credits for companies to ensure they maintain their current levels of employment and continue to pay wages to laborers.

Meanwhile, the Lasbela Chamber of Commerce and Industry (LCCI) has asked the SBP to cut its policy rate by 3.5-4pc.

LCCI President Ismail Suttur said lowering of interest rate together with cheaper oil imports will make business climate more conducive for foreign investors.

Published in Dawn, March 17th, 2020