KARACHI/LAHORE: The State Bank of Pakistan’s (SBP) decision to increase the interest rate to 15 per cent from 13.75pc was strongly condemned by the business community. Trade and industry representatives said the move would prove highly disastrous for industries and the SME sector and demanded that the government intervene and get the central bank’s decision withdrawn with immediate effect.
Talking to Dawn, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Irfan Iqbal Shaikh said he did not understand SBP’s logic in raising the interest rate to 15pc at a time when power, gas, and petroleum prices, along with looming uncertainty, have already reached new highs.
“The interest rate in Pakistan is three to four times higher than in the region, and in such circumstances, no stakeholder would dare to set up any new industries or go for any vertical expansion of their units,” he said.
“It seems that the government is more focused on dealing with political issues rather than showing any seriousness in tackling the issues of the business community. No planning is being done while the economic situation is getting out of control,” Mr Shaikh said. The FPCCI office bearer urged the government to listen to stakeholders and implement policies that will help the country recover from its economic crisis.
Business leaders term move ‘disastrous for fragile economy’
Site Association of Industry (SAI) President Abdul Rasheed said while the industry was already perturbed over the single rate of interest, the SBP has continued to crawl up the policy rate, bringing more trouble in the functioning of the industries.
He said many industries, including the textile sector, have invested billions of dollars in importing machinery in the last three years at a 4-4.5pc markup rate after obtaining loans from the banks. At the 15pc policy rate, industrialists and exporters would stop importing machinery, leading to a suspension in industrial activities besides creating unemployment and a law and order situation.
Karachi Chamber of Commerce and Industry (KCCI) President Muhammad Idrees said the SBP has increased the policy rate under some pressure, which would plunge many industries into a default situation. “The government can make borrowing, but the industries will be unable to take loans,” he added.
“What is the government doing? Will it put the economy on track by taking such decisions? “deplored Pakistan Readymade Garments Manufacturers and Exporters Chief Coordinator Ijaz Khokhar while talking to Dawn.
“In Sialkot alone, a huge cottage industry (SMEs) comprising around 7,000 small units has been in operation for a long time. So they all would be no more gradually due to the increase in the interest rate at 15pc which is already too much higher than our neighbouring countries,” he explained.
In a statement, Lahore Chamber of Commerce & Industry (LCCI) Vice President Haris Ateeq also condemned the decision, expressing concern that further increases in discount rates would raise the cost of doing business.
Published in Dawn, July 8th, 2022
