FPCCI opposes hike in interest rateSeptember 4, 2013
KARACHI: The Federation of Pakistan Chambers of Commerce & Industry (FPCCI)has opposed the idea of hike in interest rate, saying the upward revision of key policy rate will benefit banks only and not the trade and industry.
President FPCCI Malik Zubair Ahmed on Wednesday said upward revision in the interest rates will spell disaster for the grappling economy and damage the shabby investment climate while it will only benefit the lenders.
Business community expects that State Bank is bracing for an increase in the policy rate amid continued erosion in value of local currency against dollar on the behest of the IMF, he said. Private sector borrowing remains still very low as banks prefer lending to the government and a hike in the key policy rate will amount to punish the masses, government as well as the private sector as they will have to pay more interest on borrowings, he said while speaking to the business community.
Malik Zubair Ahmed said that the move will push up the cost of living, the cost of doing business leading and rate of defaults and unemployment to increase the nervousness. Private companies will find it tough to discharge obligations and raise fresh funds, he added.
He warned that hike in power prices, POL prices and expected surge in interest rate in absence of any structural reforms may hit the sentiments which have turned positive after the May 11 elections.
Malik Zubair Ahmed said that increasing interest rates in past has not helped government reduce imports of oil, food, raw material and essentials while it has reduced growth and savings, triggered unemployment and made imports costly.
Moreover, he said, it has hit investors’ confidence and eroded the ability of the government and private sector to spend on development which has stalled national progress.
He said that Government should stop blaming past rulers for poor performance and take positive steps to minimize the negative impact of hike in power and POL prices and weakness of rupee weakness which should not be intensified with an interest rate hike.
The FPCCI chief said that Pakistan needs a clear roadmap for a sustained turnaround backed by ceiling on central bank lending to the government, increased revenue collection, reduced expenditure and abolishing unnecessary exemptions as well as subsidies to breathe a new life into the limping economy.
Increasing interest rates have not prevented the flight of US dollars from Pakistan in the past, he reminded.