Lahore, July 31, 2012 (PPI-OT): 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 urged the State Bank of Pakistan to bring to single digit in the upcoming Monetary Policy scheduled for August 10.
In statement issued here, the LCCI President Irfan Qaiser Sheikh said that the highest priority of the SBP at this point in time should be the availability of cheaper money to the business doing people to strengthen the process of industrialization 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, whereas in Pakistan it is the other way round. 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.
The LCCI President said that a cut of 50 to 100 basis points would not be doing any service to the dwindling economy. He said that it was very unfortunate that we have failed to learn any lesson from the tighter monetary policy stance adopted by the State bank of Pakistan in the yester years.
Irfan Qaiser Sheikh said that ongoing economic scenario shows that there is 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 are kept higher.
Irfan Qaiser Sheikh said that 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.
The LCCI President said that the State Bank of Pakistan should understand that its continued tighter stance is inflicting a very heavy loss on the nation as the economy has 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 is direly needed.
Irfan Qaiser Sheikh said that in the last few years, the private sector had suffered set-backs because of higher cost of doing business. Investment in new industrial projects and expansion in existing industry has come to a standstill. Massive flight of capital has taken place to other countries in the region where investment and business environment is favorable 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 is 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 that the State Bank of Pakistan (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 that 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 that 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.”
For more information, contact:
Lahore Chamber of Commerce and Industry (LCCI)
Lahore -54000, Pakistan
Tel: +9242 111 222 499
Fax: +92 42 636 8854