Daily Times

KARACHI: The country’s small and medium enterprises (SMEs), comprising 70 percent of the production and trading economy, is facing acute shortage of capital inflow on back of poor government policies, finance experts said on Wednesday.

One of the sad affairs in this regard is lack of loans provided to private sector by the commercial banks during the last 10 months of current fiscal 2015-16, they said. In around 2007, commercial banks were providing 67 percent credit to the private sector enterprises, which has fallen to 37 percent by the end of 2014, they lamented.

The measures by tax and government authorities in supporting large-scale manufacturing and giving credit to the private sector, which is at present sliding, should include stopping the flight of capital, improving tax machinery and curbing speculation of different sectors, which would elixir to the ailing manufacturing and trading sector.

During July to December 2015, commercial banks provided a total credit of Rs 224.5 billion to the private sector as compared to Rs 325.8 billion during the same period of last year. It reveals the banks’ lack of support to the private sector.

Experts said the determination to invest in the country would do miracles depending on the fair and clear policies of the government in this direction. Attention to improve sentiments of the business community would attract investors to put capital in Pakistan, thus relieving country of foreign loans, they added.

Pakistanis invested over $4.25 billion in Dubai real estate sector in the last two years, which could have been utilised to help the country overcome financial problems.

The government should refrain from taking loans from commercial banks and improve governance to ensure 5.5 percent growth target, which has not been achieved so far.

Half of the population of the country, under the potential tax net, submits their returns, therefore the government is inclined towards imposing indirect taxes, thus hurting vulnerable segments besides seeking foreign assistance to balance annual budget every year.

In the next fiscal year 2016-17, inflation is likely to attain a higher plateau as core inflation is broadly following a rising trend from this fiscal year, thus indicating buildup of causal inflationary tendencies. Under such circumstances, financial managers of the government should take serious note of the situation and take appropriate measures.

Talking to Daly Times, Fazal Ahmad, a financial expert in Houston, said to enhance industrial production and confidence of the businessmen, the government, in collaboration with the business community, should evolve financial and industrial strategies in order to boost economy. Steps to fight energy crisis, security challenges and political instability are key elements to boost exports of the country, he added.

The State Bank of Pakistan (SBP) decision of policy rate cut by 0.25 percent to 5.75 percent would be meaningless until and unless SMEs were considered on priority in lending loans, said members of the All Pakistan Business Forum.

Policy rate decision would infuse confidence in the business community and propel economy, which was hostage to the past policy of austerity, they added.

The reduction in interest rate would not serve the purpose unless the pace of reforms is increased, they opined, adding that economic revival is linked to agriculture and industry and not savings, so if profit rates remain constant, it would make no difference.