Daily Times

KARACHI: Majority of export oriented sectors and industrial units in the country were of the view that State Bank of Pakistan (SBP) should have considered at least a half percent downward change in basic points system (bps) in the policy rate.

“SBP in view of high cost of doing business and delayed government announcement for relief packages to exporters could reduce discount rates by 50 bps to 5.25 percent for a period of next two months.

SBP kept policy rate unchanged at 5.75 percent for another two months, Ashraf Wathra, Governor SBP announced this on Saturday. Downward correction in bps could have provided tonic to a grappling economy to some extent and better prospects for the investment climate besides it could have provided financial relief to industrialists especially exporters, business community said.

Representatives of almost all chamber of commerce and industry in the country, industrial and trade associations along with Federation of Pakistan Chambers of Commerce and Industry, All Pakistan Textile Mills Association, Pakistan Tanners Association (PTA), Pakistan Cotton Ginners Association (PCGA), Surgical Instruments Manufacturing Association Pakistan (SIMAP), All Pakistan Marble Mining Processing Industry and Exporters Association (APMMPIEA) and other industrial and importers trade organisations said downward revision in policy rate would have provided more liquidity prospects to the industry, which was already braving the high cost of energy and production.

Policy rate cut could provide relief to the textile, leather, surgical and other major exporters in the competitive international market where India, Bangladesh, Sri Lanka and Thailand were remained leading competitors.

It would help to increase productivity, controlling inflation besides discourage the government as it was a major borrower of commercial banks and would provide industry and exporters borrowing money at lower rates, Agha Saiddain, a senior executive member of PTA said.

Surplus liquidity in the market is always important and one of the prime reasons behind investment in the industrial sector, he added.

Reduced bank mark-up rate encourages fresh investment in the industry particularly in the leading exporting textile and leather industry to help increase jobs and exports of the country.

SBP’s policy rate helps keep the cost of living, cost of doing business and the rate of defaults and unemployment within limits, he added.

The private sector could get encouragement raising fresh funds by seeking loans from banks besides the rate cut would have helped reducing oil, food and industrial raw material bills by the government as well as industries, Ghulam Rabbani senior member of Karachi Cotton Association said.

Bourses in the country could have benefited by a rate cut as stock valuations and earnings of leveraged companies perform better and provide an overall economic revival.

Private sector commercial banks’ borrowing to get momentum and banks prefer lending as well as the private sector becomes able to pay lower interest on its borrowings.

Macroeconomic indicators continued to show resilience towards improving the economy.

The textile, leather and other billions of dollars exporting sectors of the country have great potential to attract foreign investment.

Members of KCCI said different segments of the society were expecting a downward revision of up to one percent.

Industries were facing hikes in power tariffs of 67 percent, 37 percent for commercial and 18 percent for residential consumers.

APMMPIEA Chairman Sanaullah Khan said a policy rate cut would have helped developing export-oriented industrial sectors including marble, surgical and sports, as they were in need of commercial bank loans and funds from other sources at reasonable rates.

Large scale manufacturing sectors could have likely gained footing on a rate cut and low prices of raw materials could boost the manufacturing sector. The rate cut could also improve major cotton and rice crops production.

It would ease in helping in returning bank loans by borrowers, which would decrease the ratio of non-performing loans.

This rate cut would help smoothing food supplies, contain the price of perishable items, administrative prices and there was likely a low inflation rate.

Members of FPCCI said keeping bps rate unchanged by SBP can be understandable under current economic policies of government.

However we should keep policy rate within the range of regional countries where it is less than us.