KARACHI, Jan 24: Dr Salman Shah, adviser to the prime minister on finance and economic affairs, said on Tuesday that the government would continue with its tight monetary policy to further bring down inflation rate at a targeted level of five per cent by next year.
Therefore, he said that interest rates would also not be brought down and the government would like to see that the entire economic cycle was completed to allow inflation to come down resulting in lower interest rates.
Talking to members of the All Pakistan Textile Mills Association (Aptma), Dr Shah advised textile tycoons to set their house in order instead of looking at the government for incentives or slashing down of interest rates.
He said the government wanted to see the inflation rate at five per cent by next year because even today depositors were not getting return on their savings as the inflation rate was as high as 10 per cent.
The adviser said that about three years ago interest rates were negative at 1.5 per cent, with inflation rate at five per cent, but thereafter inflation had gone as high as 10-12 per cent that was lately contained to eight per cent after adopting tight monetary policy.
However, he said in April 2005 when the government imported food items, the prices stabilized and inflation on food items came down to seven per cent. Dr Shah said that if cement and steel prices came down, inflation would also recede to 7.5 per cent this year.
Responding to a query raised by an Aptma member that people in the corridors of power complain that the textile industry pays less tax, Dr Shah said when the country had the lowest tax-to-DGP ratio and out of Rs700 billion revenue collection, only 10 per cent comes from the textile sector which constituted 46 per cent of the total manufacturing sector.
He suggested that big players in textile should enter into value-addition and consolidate their working as the government could not provide them solution to the market-based issues. The adviser said further that the textile industry was enjoying a zero rate in sales tax, but added that this was a temporary arrangement as it was hurting other industrial sectors. “Being the fourth largest cotton producer, the country can benefit a lot or else will become a cotton and yarn exporting nation, which is an easy job to do.”
He asked the Aptma members to carry out a study to find out solution to their problems and the government would do its job to see that their genuine issues and irritants were removed. Dr Shah said that a consultant of world repute should be hired to carry out the study on textile industry of the country.
Leading Aptma members, including Bashir Ali Mohammad, Anwar Tata and Mina Abdullah, highlighted problems confronting the industry. They were of the view that high cost of inputs and interest rates was making the industry uncompetitive in the world market.
Earlier Aptma Chairman Ahmed Kuli Khan Khattak said that due to high input costs Pakistan was becoming uncompetitive and loosing its share in the world market to China, India, Bangladesh and Sri Lanka.
Citing an example, he said in the last one year, prices of diesel, furnace oil and gas had gone up by 42 per cent, 47 and 32 per cent, respectively. He urged the government to rationalize financing policies and bring in stability in the availability of energy sources.