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Any further increase in markup to hit economy: LCCI

Any further increase in markup to hit economy: LCCI

LAHORE  – The Lahore Chamber of Commerce and Industry Thursday urged the State Bank of Pakistan to avoid any further hike in policy rate as it would hinder the economic growth.

In a statement, LCCI President Mian Nauman Kabir, Senior Vice president Mian Rehman Aziz Chan and Vice President Haris Ateeq said that interest rate is an important input for the industry and always influences the cost of production. It will be better if State Bank of Pakistan brings down interest rate by at least 250 to 300 basis point to give a jumpstart to the economic activities and to revive the industrial sector.

They said that how we can even imagine to compete those countries where markup rate is zero or below one percent. They said that the policy rate of 8.75% prevailing in Pakistan is considerably higher than other economies in the region (India 4%, Bangladesh 4.75%, China 3.85% and Sri Lanka 5%). This essentially means that access to finance which is imperative for the growth of industry is already more expensive in Pakistan as compared to other economies in the region. It is worth mentioning that the credit availability to private sector in Pakistan is currently only 17% of GDP which is also the lowest in the region.

The LCCI office-bearers said that the recent decision of the State Bank to increase the policy rate by150 basis points has already taken the policy rate to 8.75%. Since the inflation rate for the month of November 2021 has increased to 11.5%, there is a perception among the business community that State Bank will increase the policy rate further in the next monetary policy committee meeting to curb inflationary pressures.

They said that any decision to increase the policy rate further will have dire consequences on our economic growth rate. It will surely hinder the process of Industrialization and private sector growth. Pakistan should bring its interest rate at par with the regional rates which are much lower.

He said that State Bank of Pakistan has to bring down the interest rates keeping in view the ground realities and strict competition in the international market. He said that a cut of 50 to 100 basis points will not be address the challenged economy.

He said that it was very unfortunate that we have failed to learn any lesson from the tighter monetary policy stance adopted by the State bank of Pakistan in the yester years.

LCCI office-bearers said that ongoing economic scenario shows that there is hardly any time left for economic managers of the country and they all should understand well that a 50 to 100 basis point cut will be too little.

He said that it is now before all of us that high markup rate is no more sustainable. It has been causing a great harm to economy and would continue to do so unless and until a realist approach is adopted.

They said that the State Bank of Pakistan should understand that its continued tighter stance is inflicting a very heavy loss on the nation as the economy has already paid a very high price because of high interest rate.

He urged the State Bank of Pakistan to announce at least 250 to 300 basic points cut in markup rates that would certainly give jumpstart to the economic activities in the country.

Source: The Nation

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