Auto parts manufacturers, appreciating the State Bank of Pakistan’s move to cut the discount rate by 150 basis points, urged the central bank to bring it down to single digit, as the banking spread at 10.5% policy rate is still high after including the Karachi interbank offer rate, making undue profits for banks at the cost of the industry.
In a statement, Pakistan Association of Automotive Parts Accessories Manufacturers (Paapam) Chairman Nabeel Hashmi said that the present situation is compounded because the debt on the private sector is piling up whereas on the other side reluctance is observed on behalf of the banks for providing financial support to industries, due to the energy crisis and industrial contraction owing to high costs of production and manufacturing and massive borrowings by the government.
He said that to attract foreign and domestic investment, stable law and order, business confidence, provision of uninterrupted electricity and low interest rates are crucial.
He called for rationalisation of consumer finance scheme rates for car financing, urging the authorities to refuse consumer financing for imported cars, due to the fact that they do not contribute to any economic process or industrialisation.
He suggested the government to impose necessary safeguards for the industry. However, the sector too must respond with an aggressive localisation drive that will enable it to place better priced vehicles in the domestic market, he added.
“In order for affordable vehicles available to the Pakistani public a special consumer finance and leasing schemes with single digit mark-ups must be reintroduced for locally produced vehicles to promote growth of local auto industries, besides creating employment and generating investments,” Hashmi elaborated. Cost of vehicle financing is automatically paid back with economic benefits in the shape of taxes, jobs and technology creation, he added.
Paapam Vice Chairman Munir K Bana said that the central bank’s decision to cut interest rates will help stimulate private sector growth in the flagging economy but demanded of the central bank to announce monetary policy for a period of one year instead of two months as it would not only make rate cut meaningful and result oriented but also give the much-needed stimulus.
Published in The Express Tribune, August 15th, 2012.
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