The Rice Exporters Association of Pakistan (Reap) hailing the move of the State Bank of Pakistan to slash its benchmark interest rate by 150 basis points to 10.5 percent has asked the central bank to also cut the rate of export refinance to bring down cost of doing business of exporters.
Reap Chairman Javed Islam Agha in a statement here on Monday said that cut in policy rate to 10.5 percent was a first step towards enhancing exports and reviving industry in the country. He emphasised the need of further cut in interest rates to bring it down to single digit.
Reap ex-chairman Malik Mohammad Jahangir said it was a welcome move from the SBP, as the central bank had accepted the demand of the business community by lowering the rate. He said although the SBP had announced a decline in basic policy rate considerably, the level of interest in Pakistan still highest in the world.
Currently market interest rate in India is three percent, in US 0.3 percent, in UK 0.9 percent, in Japan 0.4 percent and it is 10.5 percent in Pakistan, he quoted. Due to high discount rate in the region and in the world, the production of Pakistan had become uncompetitive.
He said the business community, for a long time, had been demanding the reduction in the discount rate to lower the cost of production, which was badly affected by various reasons, including the high discount rate. Reap Chairman Javed Islam Agha observed that political stability, sufficient energy and controlled law and order were must along with cut in interest rate for creating investment climate in Pakistan.
He said the availability of interest free loan would even not work for industrialisation in the country if stability on said fronts was not guaranteed by the rulers. He said the rate cut might have made the financing cost manageable for new ventures in the industrial sector.
Javed Agha said reduction in government’s borrowing from banks was a must for expediting investment process in the industrial sector. He hoped that SBP would finally reduce the discount rate to below nine percent considering the mounting non-performing loans which had now crossed the alarming level of Rs 500 billion mainly due to closure of industry.
He recommend to government to come up with clear cut energy security plan for next 20 years to be shared and approved by all political parties of Pakistan and finally to be approved by the Parliament thus all political parties whether in the government or not would be responsible to follow and implement the proposed energy security plan.