KARACHI: The trade and industry bodies have extended conditional support to the recently announced temporary financing scheme aimed at saving thousands of jobs, asking for further cut in the interest rate.
The State Bank of Pakistan (SBP) on Friday announced a new scheme called the Refinance Scheme for Payment of Wages and Salaries to the Workers and Employees of Business Concerns, offering liquidity at 4-5 per cent to employers so they don’t retrench workers.
Economic challenges posed by the coronavirus have forced the SBP and the government to take out-of-the-box measures to save millions from joblessness and starvation.
Over the past month, a series of steps have been taken to protect trade and industry from adverse impact of the coronavirus and the resulting lockdown. This includes the disbursement of rebates, a relief package for the construction sector and import relaxations for hospitals and medical centres among others.
“By linking the interest subsidy to the size of the payroll, it fails to fully assist the largest employers in the formal sector, who also generate the most exports, pay more taxes, and have greater investment and fixed cost to defray,” said the Pakistan Business Council in a statement in response to the SBP’s scheme.
The PBC believes that all employers in the formal sector should be able to benefit from this scheme. Aside from salaries, the larger companies also offer facilities that others don’t and thus add to their fixed costs, it continued.
The mark-up on loans under this SBP scheme will be up to 5pc while borrowers on the active taxpayers list will avail at a further reduced rate of 4pc.
“It comes as a surprise that the scheme would be open to employers not on the active taxpayers list. The positive discrimination for active tax payers could have been 3pc (instead of 1pc) in consideration of their higher standards of employments documentation and regular social security payments,” said the PBC.
It also recommended payroll overdrafts at 2pc per annum.
Meanwhile, North Karachi Association of Trade and Industry (NKATI) demanded that loans under the scheme be interest free.
NKATI Patron-in-chief Moiz Khan and President Nasim Akhtar said in a statement that 4pc interest should be abolished and Islamic mode of financing be included.
They said the new SBP scheme is a timely step to protect millions of employees and would save the economy.
With the lockdown continuing and the number of cases on the rise, it is difficult for trade and industry to assess how much money would be required for what periods.
However, they found the scheme encouraging that the SBP has been taking initiative to minimise the negative impact of Covid-19 on the economy.
Published in Dawn, April 12th, 2020