Business leaders urge action to ease economic strain

Call for interest rate reduction, policy reforms to revitalise business landscape

GOHAR ALI KHAN March 22, 2024
photo: file


Business leaders have appealed to the government and the finance ministry to swiftly reduce the interest rate to single digits and take measures to provide relief to businesspeople, traders, and industrialists. They caution that without such actions, all efforts for economic development would be in vain.

Speaking to The Express Tribune, representatives from various sectors, including industrialists, agriculturalists, auto manufacturers, auto dealers, traders, presidents of trade bodies, leaders of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), and the entire business community, expressed distress and put forward proposals to improve the economic condition.

They stressed the need for the central bank to prioritise core inflation over general inflation immediately, as this excludes the most volatile components of the inflation basket. They also advocate for lowering interest rates to open up new avenues and increase purchasing power.

Furthermore, they stress the need for the government to ensure the effectiveness of price control measures, establish a robust price control magistracy system, and take vigilant actions against hoarding.

Concerns are raised about the substantial increase in the unemployment rate due to poverty, which could lead to a rise in crimes. Instead of a decrease, commodity prices are soaring, making gas and electricity tariffs unaffordable even for affluent individuals. They point out that industrial consumers face non-competitive power tariffs and call for charging them the actual cost of electricity, estimated at Rs25.86 per kWh, while advocating for abolishing the cross-subsidisation mechanism hurting the national economy.

In light of a significant surge in capacity charges, amounting to 71.8% of the power purchase price for FY2023-24, urgent measures are deemed necessary, including renegotiating power purchase agreements with IPPs to extend the debt repayment period.

Chairman of the Pakistan Business Group, Farazur Rahman, criticised the decision to maintain the interest rate, stating it is unbearable for industries and will result in closures and halt new investments. He expressed disappointment over the State Bank of Pakistan (SBP)’s announcement to keep the interest rate at 22%, attributing it to IMF pressure.

Rahman voiced dismay over the lack of relief measures for the industry, which local industrialists had been expecting. He underscored the importance of reducing the interest rate to stimulate the national economy and job creation, highlighting the need for affordable financing options for industrialists to sustain and expand their operations.

“We were all hopeful for a reduction in interest rates to stimulate the national economy and spur job creation. High interest rates hinder job opportunities,” remarked Muhammad Kamran Arbi, President of the Site Association of Industry. “Industrialists require loans for various purposes such as acquiring new machinery, securing working capital, and establishing new ventures. However, the lack of affordable financing options poses significant challenges. Given the current economic scenario, it’s difficult to find highly profitable businesses capable of offsetting the burden of elevated interest rates and loan costs,” he added.

Published in The Express Tribune, March 22nd, 2024.

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