ISLAMABAD: Senior Vice President of Pakistan Businesses Forum (PBF), Muhammad Riaz Khattak has suggested the State Bank of Pakistan to adopt an accommodative monetary policy stance, asking the finance minister Ishaq dar to fulfil his commitment of reining in inflation besides cutting interest rate and strengthening the undervalued local currency against dollar.
While talking to members of the business community on Monday, he said the already unprecedented inflation and high mark-up rate have drastically reduced private sector borrowings during the first quarter of the current fiscal year.
The government estimated the economic growth rate would be in the range of 3 to 3.5pc while international agencies predict it would be as low as 2.3% for FY23 amidst highest key policy rate in the region.
Khattak demanding competitive interest rates at regional countries’ level, he said, the SBP’s stance of keeping the monetary policy rate high compared with the mark-up rate of China, India and Bangladesh is not good for industrial growth.
The current SBP policy rate is 15% while the inflation in Sept was over 23% compared to 27% in August, which shows the real interest rate is negative with a wide margin.
The PBF SVP asked the finance minister to fulfil his commitment of maintaining an accommodative monetary stance in the near- and long-term to support the rare recovery, amid uncertain heavy floods worries and challenges in the country.
He stressed the need for reduction in the discount rate, arguing that low key policy rate is essential to make the Pakistani exports sector, as well as the local industry competitive.
He also said that the achievements of high exports and stabilization of the economy require friendly monetary policy measures so that the debt liability of the business sector is compensated through lower mark-up rate.
The economic activity data and indicators of consumer and business sentiments are not satisfactory, so the trade and industry need continued support from the government in the form of lower interest rates, amid such external shocks.
However khattak appreciated energy tariff relief for the export sector, also demanding the same relaxation, especially for the Small and Medium Enterprises (SMEs) as a first step towards a cut in the production cost, while the second and vital step towards this direction would be bringing discount rate to the regional level with a view to provide level-playing field to the industry.
The decision would have the same importance for the domestic industry too, as it has also been facing tough competition of cheaper imported merchandise in the country; following FTAs with several countries, he added.
Appreciating the SBP role in sustaining economic growth through supporting trade and industry, he said, the reduction in interest rate would be a vital relief to the business community. For this, the government will have to reduce the production cost of the industries to avail this offer by the international buyers.
Chairman PBF KP Chapter, Umer Masood ur Rehman said the central bank should announce an initiative related to loans for the Small and Medium Enterprises (SMEs) particularly in the flood-hit areas, as the sector has to show collateral to banks, which are always reluctant to offer them concession credit.
He thinks that the trade deficit and ongoing interest rate will kill the economy. This is the result of taking foreign loans and the continuous rupee depreciation and calling for putting an end to this destruction.
Chairman KP also made it clear that the access to finance should be made affordable to create an enabling environment for the businesses to remain competitive in the regional and international markets.
Umer Masood further said only enhancing the exports and bridging the trade gap had the potential to help stabilize the economy, put a halt to rupee depreciation, create millions of jobs and generate hundreds of billions in taxes. TF REPORT