Daily Times

KARACHI: The export-oriented industrial sector and members of business community have expressed mixed reaction over the policy rate cut in announced by State Bank of Pakistan (SBP).

The SBP has announced cut of 25 bps from 6 percent to 5.75 percent in its monetary policy statement. The members of prime export sectors including textile (garments), leather, surgical and sports, besides developing sectors like marble and fruit expressed their mixed reaction over cut in policy rate.

Talking to Daily Times, Agha Saiddain, senior member of Pakistan Tanners Association, the second biggest forex earner sector after textile, said 25 percent bps cut would soothes to some extent but it would be better in the interest of export sector to have 100 points cut in the bps.

Agha said it would help stimulate private sector growth but he suggested measures should be taken to make interest rate cut meaningful and result oriented.

A considerable cut in bps rate is a panacea to low investment phenomenon and small and medium enterprises (SMEs) should be given priority. The private sector credit would pick up pace that would help in triggering the expansion of current businesses as well as attraction of new investment, he added.

The central bank should ensure that commercial banks increase their lending to the SMEs, which were the real engines of economic growth.

Pakistan Apparel Forum Chief Jawed Bilwani, chief coordinator of five export-oriented sectors said the cut would help ensure availability of cheaper money to cash-starved private sector, besides encouraging the potential foreign investors for investment.

He expressed hope that the interest rate would further be lowered in the upcoming budget.

“The provision of ample cheaper liquidity is the dire need to create new businesses but in the past the higher interests kept the private sector growth at the lowest ebb causing huge damage to the businesses and unemployment graph also witnessed an unusual surge,” they added.

Members of Karachi Chamber of Commerce and Industry (KCCI) said that the SBP should have brought the benchmark interest rate down by 1 percent to 2 percent.

“However, cutting policy rate to 25 percent will be beneficial for the economy as it will decrease input cost of businesses and facilitate easy credit availability to the private sector.”

Meanwhile, former finance minister Salman Shah said that though it is encouraging, it is unlikely to have positive impacts on economic revival and growth given the deflationary environment.

Hailing the cut in the policy rate, All Pakistan Marble Mining Processing Industry Chairman Sanaullah Khan and Exporters Association said the government seemed a major beneficiary of decline in the interest rates, as its interest payments on domestic debt would reduce and lead to re-rolling and re-pricing of the debt. He said decline in cost of borrowing would spur private sector lending and motivate households to increase spending.

The traders in general hailed SBP’s decision of trimming the interest rates, as it would “enhance economic activities and consequently would create more jobs”.