Daily Times

KARACHI: The representatives of prime export-oriented industrial sectors in the country showed a mixed reaction on unchanged basic points system (bps) in discount rate (DR) by State Bank of Pakistan (SBP).

Representatives of textile, leather, surgical, sport goods and marble and trade bodies opined that SBP would have to cut at least 50 bps in policy announcement.

SBP kept policy rate unchanged at 5.75 bps for another two months.

Downward revision in bps could have been provided further boost to grappling economy to some extent and better prospects for investment climate besides provide financial relief to industrialists especially exporters.

All chambers of commerce and industry besides 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, Surgical Instruments Manufacturing Association Pakistan, All Pakistan Marble Mining Processing Industry and Exporters Association (APMMPIEA) and other industrial and importers trade organisations said that surplus liquidity in market has always been important and one of the prime reasons behind investment in industrial sector.

Downward revision in policy rate provides more liquidity prospects to the industry, which is already braving high cost of energy and production.

Cut in bps rate could have helped these prime sectors in competitive international market where India, Bangladesh, Sri Lanka and Thailand were remained leading competitors.

Controlling inflation besides discourage the government as it was a major borrower of commercial banks and would provide industry and exporters borrowing money on lower rates, Agha Saiddain, senior executive member of PTA, said.

Lower interest rate always encourages fresh investment in the industry particularly in leading exporting textile and leather industry, he added.

Private sector gets encouragement in raising fresh funds by seeking loans from banks besides rate cut help reducing oil, food and industrial raw material bills by the government as well as industries, Ghulam Rabbani, senior member Pakistan Yarn Merchant Association, said. The policy rate cut also improves major cotton and rice crops production, he added.

Bourses in the country also get benefitted from rate cut as stock valuations and earnings of leveraged companies show better and for better for overall economic revival.

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

Members of KCCI said downward rate cut could benefit different segments of the society.

Industry is currently facing hike in power tariffs of 66 percent, 38 percent for commercial and 17 percent for residential consumers.

Sanaullah Khan, APMMPIEA chairman, said the policy rate cut could have further helped developing export-oriented industrial sectors including marble, surgical and sports.

Commercial bank loans and funds from other sources on reasonable rates are always needed by these sectors.

Large scale manufacturing sector is likely to gain footing due to rate cut and low prices of raw materials boost manufacturing sector.

On back of lower interest rate, returning banks’ loan by borrowers stands easy besides decreases ratio of non-performing loans.

Jawed Bilwani, the Pakistan Apparel Forum chief, said the business community always asked the government to adopt long-term policies instead of short-term policies.

Production cost depends on lower interest rate and that also helps prime exporters enable to compete in international market.

FPCCI and Karachi Chamber of Commerce and Industry members said cut in bps could have to bring further liquidity to industries that make unable industries to meet their production and export targets.

This step would help to control unemployment and expansion plans of industry and it would be better if mark up would come to 5 percent.

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