The Businessmen Panel (BMP) of the Federation of Pakistan Chambers of Commerce (FPCCI) has rejected the central bank’s decision to jack up key policy rate by 100 basis points, taking it to 16%, the highest since 1998, stating that Pakistan’s interest rate was already very high in view of the regional countries markup rates. BMP Chairman and FPCCI former president Mian Anjum Nisar asked the SBP to follow regional countries, who have maintained their key policy rate at an average 6.5% to attract investment and stimulate the economy.

These countries can manage surging inflation through regulatory tools without throttling growth, so Pakistan should also take benefit of such approach, he added. He stressed the need for a reduction in the discount rate, arguing that low key policy rate is essential to make Pakistani exporting sector as well as the local industry competitive. In the absence of any stable atmosphere, the SBP’s decision to raise the interest rate will further ruin the economy, he said, adding this is why the businessmen had opposed the bill for SBP’s autonomy.

Mian Anjum Nisar also demanded the immediate reduction in electricity tariff, especially for SMEs as a first step towards a cut in production cost, while the second and vital step toward this direction would be bringing the discount rate to the regional level with a view to providing level-playing field, especially to the export industry. The decision would have the same importance for the domestic industry too, as it has also been facing tough competition of cheaper imported merchandize in the country following FTAs with several countries, he added.

While appreciating the central bank’s role in sustaining economic growth through supporting trade and industry in past, he said that a reduction in interest rate could have proved to be a vital relief to the business community. The BMP chief said that the authorities would have to reduce the production cost of the industries to avail this offer by the international buyers. He said that the central bank should announce an initiative related to loans for small and medium enterprises (SMEs), as the SME sector has to show collateral to banks, which are always reluctant to offer them concessional credit.

He said it is high time that government should revise the interest rate to turn Pakistan into a production economy.  He said our future lies in strengthening the production sectors, but that would require the government to make a decision and cut the cost of credit as there is no justification to keep interest rates that high particularly when this policy is unlikely to produce the desired results in the wake of cost-pushed inflation. Mian Anjum said that tight monetary policy has not produced desired results for the economy in past as the inflation rate on which the current policy is based, is once again surging despite increasing key policy rate.

Credit : Independent News Pakistan-WealthPk