Fearing that the highest-ever rate of markup may put a reverse gear to all measures aimed at well being of economy, the Lahore Chamber of Commerce and Industry (LCCI) urged the State Bank of Pakistan to bring it to single digit in the upcoming monetary policy scheduled for August 10.
LCCI President Irfan Qaiser Sheikh, in a statement on Tuesday, said the highest priority of the SBP at this point should be the availability of cheaper money to the business doing people to strengthen the process of industrialisation and to arrest the fast widening graph of unemployment.
In a country where the economy is facing a recession, the interest rates are brought down to stimulate growth. In the last two years interest rates in Europe and the United States have been brought down close to zero to save the economies from collapse. This is the time that interest rates should be brought down to single digit to spur growth, he said.
He said that a cut of 50 to 100 basis points would not be doing any service to the dwindling economy, adding it was very unfortunate that “we have failed to learn any lesson from the tighter monetary policy stance adopted by the SBP in the yester years.
He said that ongoing economic scenario showed that there was hardly any time left for economic managers of the country and they all should understand the gravity of the situation that there would be no business community buyer if the interest rates were kept higher.
Irfan Qaiser Sheikh said “it is now before all of us that high discount rate is no more sustainable. It has been causing a great harm to economy and would continue to do so unless and until a realist approach is adopted.”
He said the SBP should understand that its continued tighter stance was inflicting a very heavy loss on the nation as the economy had already paid a very high price because of high interest rate.
The LCCI President reminded the policy makers that the private sector was the only hope for salvaging this country from a total economic collapse therefore a significant cut in cost of doing was direly needed.
He said that in the last few years, the private sector had suffered setbacks because of higher cost of doing business. Investment in new industrial projects and expansion in existing industry had come to a standstill. Massive flight of capital has taken place to other countries in the region where investment and business environment is favourable and future prospects are brighter.
The LCCI President also urged the SBP to stop lending to the government above the set limit because excessive borrowing by the government was one of the reasons of high inflation. “The industries are taking the brunt of higher discount rate regime in the country,” he said.
Irfan Qaiser Sheikh said the SBP itself had identified the government’s excessive borrowing as the primary cause of inflation, so it should reduce lending to the government. He said the SBP was preparing monetary policy without studying the nature of inflation in Pakistan that was ‘not demand pull inflation’, which could be controlled through tight monetary policy.
He said the central bank had failed to control inflation in the country by increasing discount rate. “Therefore, it should stop its inflation-controlling monetary policy and should devise a growth-inducing policy. If the government does not design growth-inducing policies, the situation will worsen further” he added.