Criticism: Cut in interest rate will only benefit govt, says PBIF

Criticises SBP for ignoring business-related issues including reduced tax collection

ISLAMABAD: The recent cut in interest rate by the central bank is not enough to stimulate growth as the government would need policy interventions to change the gloomy economic situation, said Pakistan Businessmen and Intellectuals Forum (PBIF) President and former provincial minister Mian Zahid Hussain.

“Reduction in interest rates can contract inflation, which will go up again with the increase in gas and power tariff if the rupee is devalued,” he said.

“Cutting interest rate would not work its magic to resolve issues that require step-by-step assessment,” he added, addressing the business community.  He said the SBP had anticipated a good income through the Euro and Sukuk bonds, IMF loan and government receipts, but it failed to shed enough light on subsided exports, reduced tax collection, unsatisfactory investment climate and the plight of the large-scale manufacturing sector.

“The bank links improved exports to situation in the US and the EU while ignores to see problems at home,” he said. “Moreover, the policy review hoped the manufacturing to pick up due to improved energy supply, but the reason for the improvement was not divulged.”

He further said the reduced policy rates were also termed beneficial for the productive sector to secure more loans from commercial banks; however, the ground reality was otherwise. “Banks continue to ignore the private sector, including SMEs and their advances are falling steadily since November 2014 despite the reduction of 3.5% in the interest.”

Zahid was of the view that the private sector got more loans when the interest rate was in double digits, before the record fall in global oil prices. 

Published in The Express Tribune, September 15^th,  2015.

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