Press Coverage


By: Our Staff Reporter | Business Page 8 | March 22, 2015

Cut in policy rate will support economy: Businessmen

The business community on Saturday lauded the State Bank of Pakistan’s decision of cutting interest rate by another 50 basis points, saying it would help stimulate private sector growth. But, they also complained that lending to private sector by the commercial banks during the last eight months has not picked up pace despite significant cut in policy rate by the central bank.

All Pakistan Business Forum President Ibrahim Qureshi said the SBP governor deserved appreciation for bringing down the interest rate to 8 per cent from 9.5 per cent in short span. However, Ibrahim Qureshi called for measures to overcome energy crisis, security challenges and political instability to make interest rate cut meaningful and result-oriented.

He said that some seven years back in 2007 banks were providing 67 per cent credit to private sector which has fallen to just 37 per cent by 2014. They said as per monetary policy statement January 2015, banks provided total credit of Rs 224.5 billion to private sector during the first half of financial year 2015 as compared to Rs 325.8 billion during the same period of last year which again shows banks’ declining supporting role to private sector.

He said the cut would help ensure availability of cheaper money to cash starved private sector besides encouraging the potential foreign investors for investment in Pakistan.

Renowned economist Dr Shahid Hassan Siddiqi said that the State Bank approach toward monetary policy had been rather conservative and is based on its own analysis of the situation. The continued tight monetary policy in the past has paid some dividends in reviving economic and financial stability but in view of the latest internal and external development, the SBP approach from now onwards should be beneficial to both the businessmen and the general public. The government must come up with concrete policies to reduce rampant corruption in state-owned organisations, eradicate poverty and unemployment. FPCCI President Mian Adrees urged the governor SBP to review all other economy related banking policies and facilitate the private sector that was engine of the growth.

He stated that cut in discount rate down by 50 basis points to 8 per cent in monetary policy will spur the economic activities. He said that reduction in interest rates cuts cost of production, strengthens debt repayment ability and improves the credit worthiness. This encourages businessmen to make investment in the productive activities, increasing the wealth of the nation.  LCCI former SVP Kashif Anwar observed that such initiatives also result in job creation, leading to increased employment opportunities. Such financing helps businessmen enhance their working capital and better manage their inventory, he added.
He believes the decrease in borrowing costs coupled with the decline in energy price may raise the exports by 15 to 20 per cent in times to come. According to Kashif, reduction in the interest rate is a good omen and it is a step in the right direction enabling environment for sustainability and expansion of industry in Pakistan.

APTMA Chairman S M Tanveer said the government should bring down electricity rates, logistics in the falling oil price scenario. He said that lower interest rate triggers borrowing and investments. He added that excessive use of bank borrowing by the government led to excessive rate of inflation, reduced the supply of credit to the private sector and increased the nominal lending rates, reflecting high inflation, attractive return offered by the government and high interest rate spread. Former Finance Minister Dr Salman Shah stated that the SBP would have to make a large cut in interest rate for the revitalisation of the country’s economic growth. However, the cut in discount rate by 100 basis points would definitely yield some positive impact. He said that Pakistan has no employment generation, as industries are being closed down and non-performing loans are rising, posing a threat to industrial growth. The government should make a substantial cut in non-development expenditure and focus on revival of growth.

APP adds from Karachi: Karachi Chamber of Commerce and Industry President Iftikhar Ahmed Vohra, welcoming the reduction in interest rate, said it will have a very good effect on the country’s economy.
KCCI President said the rate can be brought down further as oil, gold and other commodity prices in international market are declining. “In developed countries, the policy rate is between 5 to 6 percent,” he mentioned.He emphasized the need for maximum facilitation and expanding credit line to small and medium enterprises (SMEs) to ensure their rapid growth as SMEs do play leading role in an economy.