APTMA, FPCCI demand cut in interest rates

Textile industry urges 400bps rate cut as FPCCI warns of revenue decline

ISLAMABAD:

The All Pakistan Textile Mills Association (APTMA) has called on the Monetary Policy Committee (MPC) to reduce interest rates by at least 400 basis points in its upcoming meeting on September 12, 2024. APTMA Chairman Asif Inam stressed that the current economic situation requires urgent action to ease financial pressures on the industrial sector, especially as inflation continues to fall.

"We are deeply concerned about the prevailing interest rate of 19.5%, which translates to a real interest rate of approximately 10%. This level is unprecedented and unsustainable given the current economic realities," Inam stated. He urged the MPC to align its monetary policy with the declining inflation rates to support the struggling industrial sector.

According to the Pakistan Bureau of Statistics (PBS), inflation dropped to 11.1% in July 2024 and further decreased to 9.64% in August 2024. Despite this reduction, the MPC has yet to adjust interest rates accordingly. High real interest rates are hindering economic growth and limiting the industry's ability to access much-needed capital.

Inam highlighted that the textile sector, a critical driver of Pakistan's economy, is being severely impacted by the high cost of borrowing. He argued that without affordable financing options, the industry cannot expand, innovate, or compete internationally, threatening both export potential and the livelihoods of millions of workers. APTMA urged the MPC to decisively cut interest rates by at least 400 basis points in its upcoming meeting.

Similarly, Federation of Pakistan Chamber of Commerce and Industry (FPCCI) Vice President Zaki Aijaz and Former Punjab Minister for Industries SM Tanveer, on Monday, urged the government to reduce the interest rate to 12% and set electricity prices at 9 cents per unit for all industries. They warned that without these reductions, government revenue might decline.

Aijaz stressed that lowering electricity rates and interest rates would restart closed industries, generating Rs500 billion in revenue. He highlighted that many factories have shut down due to high borrowing costs and electricity prices.