ISLAMABAD, Nov 23: The Senate Standing Committee on Finance here on Thursday expressed its serious concerns over the existing high rates of interest on loans that have multiplied the cost of doing business and damaged the industry and exports.

Swelling interest rates have raised profitability of the banking sector in the country and attracted leading international banks towards either acquiring or merging with banks in Pakistan or planning to launch their operations here.

However, due to this factor, the profitability of the textile sector dipped in the first quarter of the current financial year by registering a negative growth of 14 per cent. Because, the rising cost of financing has subsequently pushed up the cost of production.

There is also an unimaginable spread between deposit and lending rates -- ranging between five and six per cent on average against two per cent worldwide.

While briefing the committee, State Bank Governor Shamshad Akhtar said that the compulsion of ensuring proper liquidity management and to control inflation had made the government increase the rate of interest. She claimed that the “real interest rate” was not higher than 1.5 per cent.

Chaired by Senator Ahmed Ali, the committee decided that matters pertaining to the State Bank would be discussed in another meeting to be held in Karachi during the first week of December.

The committee also reiterated its earlier demand that the Federal Bureau of Statistics (FBS) be made an autonomous organization to ensure the reliability of the basic economic data of Pakistan as all development planning was based on it.

Some members observed that during the last three years, they had been demanding autonomous status for the FBS but it seemed that the government never cared about this vital issue, which had kept the whole development and growth data hostage to suspicions.

Opposition members expressed their reservations over the credibility of the figures about poverty. They also raised doubts about the figures of inflation rate, trade deficit, and domestic debt figures.

They said the high interest rates had ruined the industry and dwindled exports to an alarming level. They demanded more judicious and efficient utilisation of foreign remittances, particularly for setting up new industries to create more job opportunities.

Minister of State for Finance Omar Ayub Khan said that though the government had achieved major success in some areas, it was facing serious challenges in the others. He attributed the rising import bill to high oil prices in the international market and increase in the consumption of imported raw material by the industries.

Infrastructure, he added, had to be improved, human resource development be taken seriously, and the competitiveness of the Pakistani industries had to be enhanced to coup with these challenges.