Traders demand deeper rate cuts to kick-start ailing economy

Updated April 18, 2020

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Say exports have taken a hit since lockdown started. — Dawn/File
Say exports have taken a hit since lockdown started. — Dawn/File

KARACHI: While cautiously welcoming the 200 basis point cut in interest rate, industrialists on Friday demanded further cuts similar to other nations who have brought down the policy rates to zero in order to save industries from a collapse.

Site Association of Industry Patron-in-Chief Zubair Motiwalla and Chairman Suleman Chawla said that in view of the uncertain business environment amid rising coronavirus cases, there is a need for further rate cut in the larger economic interest of the country.

They were of the view that bringing down the rate to nine per cent would help and support trade and industry, stock market and the national economy as a whole because the country’s exports have suffered badly since the lockdown. There are no shipments, goods are lying in go downs and there are no signs of this crisis going away, they added.

They requested State Bank of Pakistan (SBP) Governor Reza Baqir to make refinancing under the “Refinance Scheme for Payment of Wages and Salaries” interest free. They said that around 90pc of the investment in small and medium businesses is done by businesspersons out of their own capital.

North Karachi Association of Trade and Industry Chairman Naseem Akhtar said the cut is not enough and asked PM Imran Khan to direct SBP governor and bring down the interest rate to zero. He said that business community was earlier demanding the SBP to slash the interest rate down to 5-6pc but current economic health and negative impact of coronavirus on industries and trade suggest that it should be zero.

Pakistan Automotive Manufacturers Association Director General Abdul Waheed Khan said it is premature to analyse the impact of rate cut on car sales through bank financing. “I do not think that 9pc will boost auto sales,” he said while adding that sales during 9MFY20 were already down due to high prices on account of exchange rate, 7pc additional customs duty, 5pc advance tax, 2.5-7.5pc federal excise duty, while car production has come to a halt for the last one month due to the lockdowns.

He said that when the interest rate was 13.25pc, banks were charging 18-20pc from consumers, while after the recent cuts in last month, buyers would still have to pay at least 13pc on car financing.

Karachi Chamber of Commerce and Industry (KCCI) President Agha Shahab said, “the SBP should have brought down the interest rate to 4pc or 4.5pc.” He said the Karachi chamber had asked the government to bring down duties, taxes and levies, utility charges and oil prices by 50pc so that trade and industry can work smoothly as long as the pandemic exists.

He suggested that the SBP should take a bold step and announce further rate cut from 9pc to 4-4.5pc to kick-start the ailing economy.

Published in Dawn, April 18th, 2020