All Pakistan Business Forum calls for regionally competitive interest rate to counter weak growth
Lahore, November 14, 2013 (PPI-OT): The All Pakistan Business Forum, criticizing the State Bank’s move to increase discount rate by 50 basis points and describing it a blow to the industry, has called for regionally competitive interest rates and urged the central bank to bring its key policy rate to single digit to counter weak growth and revive private investment.
APBF Chairman, Nabeel Hashmi, said the SBP has made a U-turn by raising the discount rate to 10% from 9.5% in the Wednesday’s monetary policy statement.
“This will hinder the investment in industrial sector once again and result in expanding defaulters’ list.”
He said there was no level-playing field in the region in terms of interest rate as well as energy tariff. Pakistan is far ahead of the regional competitors so far as the interest rate bench mark was concerned, charging now 10% against 7.25% in India, 6% in China and 7.75% in Bangladesh, he observed.
According APBF chairman, an average electricity tariff for industry in the South Asia region was below 10 cents against 15-18 cents in Pakistan, as tariff cost in China, India, Bangladesh and Sri Lanka was 8.5 cents, 11.3 cents, 7.3 cents and 9.2 cents.
Mr. Hashmi said that the interest rate should not be higher than 8 per cent for the sake of expansion in investment activities and for creating jobs for the millions of young people entering the job market every year. He said that availability of cheaper money is absolutely necessary for bringing down the cost of production as it is like any other industrial input. If its price is raised, the cost of production also goes up.
APBF central president Rashid Mehr said that Pakistani goods had already lost their due place in the global market for being uncompetitive. He said that high interest rate also keeps the manufacturers from investing money in capacity expansion, in technological up-gradation and product diversification.
He said that the availability of liquidity to the business community is need of the hour as the SBP tight monetary policy in the name of financial discipline had already caused irreparable dent to the private sector growth and brought in an unusual surge in unemployment. He said that neither any industrial expansion took place nor any investor put money in any new business venture.
APBF other office-bearers including Yaqub Tahir Izhar, Imtiaz Rastgar and Munir Bana also rejected monetary policy and said that mark up at 10% would add more to the Non Performing Loans (NPLs) and unemployment in the private sector.
They said the industry was expecting a reduction in interest rate to single digit, as the industry was accruing heavy losses on present levels amidst unprecedented energy crisis in the country. They also criticized the SBP approach on curbing inflation through high mark up, as major borrower of the banks was the government and not the private sector.
The government was borrowing heavily at the cost of the growth of private sector, which was losing viability fast due to high financial cost, they added. They said absence of surplus liquidity in the market was prime reason behind lack of investment in the industry. The population, on the other hand, was multiplying fast, which means high rate of unemployment in the absence of expansion plans of industry due to high interest rate
For more information, contact:
Umair Ali Khan
All Pakistan Business Forum
140 – Main Quaid-E-Azam Industrial Estates,
Kot Lakhpat, Lahore 54760
Phone: +92 42 35116465
Fax: +92 42 35115295
Tell: +92 307 7778234