Business demand: Lower discount rate urged ahead of monetary policy announcement

FPCCI chief wants incentive for businessmen.

KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Zakaria Usman on Friday said the State Bank of Pakistan (SBP) can play a vital role in reviving the economy by reducing the discount rate.

The central bank is due to announce the upcoming monetary policy today and Usman said that a reduction in the rate would reduce pressure on the industry.

“This would ensure affordable financing for the industrial sector,” said Usman.

He added that the FPCCI has been emphasising on the need for a conducive environment for commercial and business activities in the country. “The new monetary policy should be liberal and business friendly.”

According to Usman, the graph of business productivity has been declining in lieu of sit-ins in Islamabad. Floods have adversely affected the economy.

“The cost of doing business is on the rise while the increase in non-performing loans is creating hurdles as well.”

He said that due to the prudent economic policies of the government, inflation has been reduced. However, the impact of the relatively controlled inflation should be passed on to the business sector in the form of a reduced discount rate.

Usman pointed out that public money in commercial banks is being utilised to finance the fiscal deficit, which is creating a saving-investment gap in the economy.

Economic managers have a general consensus that a widening saving-investment gap will lead to several economic problems including unemployment, inflation and disinvestment.

He said that public money should be utilised for enhancement of trade and investment activities through bank loans at an lower interest rate.

Usman said that it is discouraging that the private sector is reluctant to borrow from commercial banks due to the high cost of borrowing. “As the energy crisis, political instability and deteriorating law and order situation persist, continuous borrowing from banks to finance its deficit is creating a liquidity problem for the private sector.”

According to the FPCCI chief, Pakistan’s membership in the South Asian Free Trade Agreement and efforts towards bringing monetary union with the Economic Cooperation Organization block, harmonisation of the interest rate among these regional countries is essential for economic alliance.

Published in The Express Tribune, September 20^th, 2014.

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