Business community hails new monetary policy

Jalaluddin Roomi has hailed the monetary policy, describing it a move in the right direction and said that reduction in mark-up rate by 1.5 percent would alleviate the burden on the industrialists, traders and exporters. In a statement, he said that "it was our long standing demand that mark-up be brought down to single digit for flourishing the industry in the country".
He said that the current decision shows SBP's motive to continue with its policy rate cut as it already cut 50 basis points in July 2011, which reflects a positive progress. Investment spending declined sharply to 13.4 percent of the gross domestic product (GDP) in fiscal year (FY) 2011, down from 22.1 percent of the GDP in FY 2008 and the lowest level since 1974, he added. The step will also help to control the inflation at an average 11 percent in FY 2012, down from 13.9 percent in FY 2011. This policy rate cut is the biggest since July 2003, Roomi added.
He said that State Bank of Pakistan (SBP) cut its policy rate by 150 basis points (bps) to 12 percent on Saturday, marked a significant shift in monetary policy focus, which is a favourable step for the private sector's credit keeping in view the high inflation and expansionary fiscal policy over the last two years.
The trade and industry also hailed the reduction of 150 bps in the policy rate. President of Multan Chamber of Commerce and Industry (MCCI), Anis A Sheikh, expressed hope that if the present policy would continue the interest rate would be brought down to a single digit, which is the need of the hour. He said that reducing 150 basis points was a right decision and depicted SBP's business-friendly policy. This would help in reviving the industry. This policy rate cut is the biggest since July 2003, Anis added. This 150 bps rate cut will provide great hope for exporters and importers besides the recent decline in international commodity prices will also help bring down the inflation, he said.
He said, "This will help hold back the sharp decline in investment spending, which declined to 13.4 percent in FY 2011 (ended June 2011), the lowest level since 1974." It is expected that the growth will pick up to 4.2 percent in FY 2012, from 2.4 percent in FY 2011, primarily due to damage caused by floods last summer and current rains' devastation. The resulting increase in fixed investment may help the productive capacity of the economy, having a beneficial impact on inflation in the medium-term.