HYDERABAD: The Hyderabad Chamber of Commerce and Industry (HCCI) has expressed its dismay over State Bank’s decision not to review the interest ratio fixed in its monetary policy.
HCCI President Adeel Siddiqui, in a statement issued here on Thursday, remarked that “it looks that the SBP is away from ground realities,” and described its certain decisions as “unpopular”, observing that they were leading the country’s economic cycle to destruction.
He pointed out that in western world, bank credits mostly went to private sector whereas in Pakistan, the major borrower was government.
With this mark-up ratio, trade activities in countries like Pakistan could not afford its negative implications, he said. For instance, he explained, if one per cent cut was given effect in mark-up ratio, it could lead to a benefit of Rs600bn to people and similarly one per cent increase in the mark-up ratio would harm government’s interests. He said that for overcoming this deficit, government would opt for levying more taxes.
Says State Bank’s such unpopular decisions are leading economic cycle to destruction
Mr Siddiqui said the SBP had raised interest ratio to 22pc when 38pc inflation was recorded last year. “Now when inflation is hovering around 18pc to 20pc, coupled with improvement in trade balance, foreign exchange reserves and local currency, then what is preventing SBP from reducing mark-up ratio,” he argued, and noted that “all economic indicators are positive at the moment”.
The HCCI president said that SBP could benefit government by curtailing mark-up because present ratio was not leading to any positive results in taxes imposed by government. “The entire investment is utilised in paying bank mark-up. For clearing this loan, new loans become inevitable.”
Mr Siddiqui believed that the only way to improve economic activities in the country was to curtail mark-up ratio and his would help SBP as well. He urged government to take solid measures in this regard. He said businessmen and traders always kept observing trade and industrial activity in neighbouring countries, where single-digit mark-up was leading to great economic activities.
The HCCI chief said that Pakistan’s business community was feeling a sense of deprivation. He said that by only one per cent cut in interest ratio, Rs600bn benefit was provided to government and this saving could be utilised for growth which was 0.7pc last year, and that was absolutely insufficient for Pakistan. He said that trade and industrial activity should be increased to improve growth.
Published in Dawn, May 3rd, 2024
