KARACHI: Representatives of five $10 billion export-oriented industrial sectors as well as promising export potential industry have expressed mixed reactions on the unchanged basic points system (bps) in the discount rate (DR) by the State Bank of Pakistan (SBP) in a Monetary Policy statement on Saturday.
Senior members of textile, leather, marble, surgery, sporting goods and trade bodies were of the opinion that SBP would have to cut 50 bps to 100 bps in their policy announcement.
However, t was announced that the SBP will keep the policy rate unchanged at 5.75 bps for another two months.
The business community has termed a lower bps a ‘stimulant’ that could provide further energy to the grappling economy to some extent and better prospects for the investment climate in addition to providing financial relief to industrialists – especially exporters.
All chambers of commerce and industry in the country and industrial and trade associations, along with Federation of Pakistan Chambers of Commerce and Industry, the All Pakistan Textile Mills Association, Pakistan Tanners Association (PTA), Pakistan Cotton Ginners Association, Surgical Instruments Manufacturing Association Pakistan, All Pakistan Marble Mining Processing Industry and Exporters Association (APMMPIEA) and other industrial and importers trade organisations were of the opinion that surplus liquidity in the market is always important and one of the prime reasons behind investment in the industrial sector.
Downward revision in policy rate is vital for providing more liquidity prospects to the industry, which was already braving the high cost of energy and production.
A cut in the bps rate could have helped them in the competitive international market where India, Bangladesh, Sri Lanka and Thailand remained leading competitors.
The cut could also help increase productivity, control inflation and discourage the government since it was a major borrower from commercial banks and would provide industry and exporters borrowing money on lower rates, Senior Member of the PTA Agha Saiddain said.
He believed a reduced bank mark-up rate always encourages fresh investment in the industry; particularly in leading exporting textile and leather industries and helps increase jobs and exports from the country.
The private sector gets encouragement in raising fresh funds by seeking loans from banks and a rate cut will help reduce oil, food, and industrial raw material bills by the government as well as industries, Ghulam Rabbani, senior member Karachi Cotton Association, stated.
Bourses in he country also benefit from the rate cut as stock valuations and earnings of leveraged companies show better and for overall economic revival.
Control unemployment and expansion plans of the industry would become better if the mark up came to 5 percent..
Macroeconomic indicators continued to show resilience towards improving the economy.
The textile, leather and other billions of dollars sectors exporting from the country have great potential to attract foreign investment.
The large scale manufacturing sector is likely to gain footing on the rate cut and low prices of raw material that can boost the manufacturing sector. The rate cut also improves major cotton, rice and sugarcane crop production, reports Shakeel Ahmad, Chief of the Sindh Agriculture Forum.
It would help borrowers return bank loans, which would in turn decrease the ratio of non-performing loans.
The private sector commercial banks’ borrowing will get momentum. Banks prefer lending and the private sector pays lower interest on its borrowings, he added.
The industry was facing a hike in power tariffs of 67 percent; 38 percent for commercial and 18 percent for residential consumers.
APMMPIEA Chairman Sanaullah Khan said the policy rate cut could have helped develop export-oriented industrial sectors, as they were in need of commercial bank loans and funds from other sources on reasonable rates..
SBP followed a gradual policy of reducing the benchmark interest rate because it is difficult to forecast the global price of oil after a sudden fall.
Jawed Bilwani, Chief of the Pakistan Apparel Forum, said the business community always asked the government to adopt long term policies instead of short term policies.
The decrease brings production cost lower and domestic products become enabled to compete in the international market.
Members of the FPCCI and Karachi Chamber of Commerce and Industry were under the economic burden being faced by the industrial sector. In such a scenario, a cut in the bps could bring further liquidity to industries that make them unable to meet their production and export targets.
The Punjab government has initiated implementation of a comprehensive strategy to combat environmental pollution and…
Punjab Chief Minister Punjab Maryam Nawaz Sharif has approved a scheme to provide three-marla plots…
The Islamabad Capital Territory (ICT) Police on Saturday apprehended seven criminals involved in various illegal…
Deputy Commissioner Larkana Dr. Sharjeel Noor Channa has inaugurated the 7th Agricultural Population Census. The…
Punjab's Information Minister Azma Bokhari has accused the Pakistan Tehreek-e-Insaf (PTI) of arming activists and…
Parliamentary Secretary for Information and Broadcasting, Barrister Daniyal Chaudhry, blasted PTI's political decline, saying Bushra…
Leave a Comment