The representatives of Islamabad Chamber of Commerce and Industry (ICCI) said the increase of policy rate to 17% by the State Bank of Pakistan (SBP) will prove disastrous for business and investment activities besides further increasing inflation. According to a press statement received by WealthPK, the ICCI President Ahsan Zafar Bakhtawari said the business community is already facing difficulties as the cost of doing business has increased manifold.

He said that in order to revive the economy, Pakistan needs to boost economic activities, but further increase in interest rates would make bank credit almost unaffordable for private sector, leading to further contraction of business activities. Bakhtawari said that the hike in interest rate would also increase the budget deficit and foreign debt of Pakistan as according to a conservative estimate, a 1% rise in the interest rate increases the foreign debt by Rs170 billion.

The interest rate in China is 3.65%, Bangladesh and Vietnam 6%, and India 6.25%, but the 17% interest rate in Pakistan would make Pakistan’s exports more uncompetitive in the international market. He said the developed world including the US and Europe have kept the interest rate less than 5%, but in Pakistan, it has been increased to 17%, which would put the private sector at a great disadvantage.

He said the business community of the entire country has always been demanding the government to keep the interest rate in the single digit level in order to provide cheap credit facility for the promotion of business and industrial activities and attract foreign direct investment (FDI). He stressed that the State Bank should withdraw the recent hike in interest rate and consider further reducing it to save the businesses and the economy from further troubles.

Faad Waheed, Senior Vice President of ICCI, said that foreign investors will be reluctant to invest in Pakistan in an environment of such high interest rate. He said that the industry has to take credit from banks to acquire machinery, plant and other equipment, but further hike in the interest rate would hamper the growth of industrial activities and reduce exports. He demanded that the government should withdraw the hike to save the industry and economy from further damages.

Muhammad Azharul Islam Zafar, Vice President of ICCI, said the builders and developers have to finance many construction projects through banks. The hike in interest rate would hit the construction industry. He urged the government to bring down the policy rate to single digit, which will pave the way for reviving the economy.

Credit : Independent News Pakistan-WealthPk