Businessmen welcome decision

Demand cut in interest rate in future, call for further economic reforms.

KARACHI:

Industrialists and businesspersons have expressed satisfaction over the State Bank of Pakistan’s decision to keep the discount rate unchanged, but have underlined the need to reduce the interest rate in the  coming months.

The central bank on Saturday left the discount rate unchanged at 14 per cent in the monetary policy announcement for the next two months.

Korangi Association of Trade and Industry (KATI) Chairman Syed Johar Ali Qandhari said the central bank’s decision was beneficial for the whole industry.

“We welcome the State Bank’s decision, but at the same time, expect it to cut interest rate by at least one per cent in coming months. As inflation levels are falling and economy is coming back on track, we expect the government to provide relief to the business community,” said Qandhari.

To ease pressure on the economy, the government needs to bring further tax reforms in consultation with the business community. The government can increase revenues if it works on the suggestions of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), he said, adding that the business community was ready to pay taxes, assuming favourable tax reforms were introduced.

“It is a good sign that SBP did not increase the discount rate, but it must be mentioned that the benchmark interest rate is very high,” said SITE Association of Trade and Industry Chairman Wahab Lakhani. “The State Bank itself has said that the economy is showing improvement, so why not provide relief to the industry and reduce interest rate?” questioned Lakhani.

Even though the rate has been left unchanged, the industry is already struggling with the current level of 14 per cent.

However, the central bank has been warned by officials that risks to the economy were not over and the country needs meaningful economic reforms to address structural weaknesses.

Institute of Chartered Accountants of Pakistan (ICAP) former president Shabbar Zaidi said there was no threat to the economy, as the government is set to bring reforms in coming months. “The situation will not deteriorate, though there is still a need for more economic reforms,” he added.

Topline Securities Chief Executive Muhammad Sohail urged the central bank to bring structural reforms in the economy in the coming federal budget. “The recently introduced tax measures represent a step in the right direction, but a lot depends on the coming budget,” said Sohail.

Published in The Express Tribune, March 27^th, 2011.