ISLAMABAD: There is need for a further reduction in policy rate by the State Bank of Pakistan (SBP) in view of the prevailing economic situation and to bring back economic activity in the country following the Covid-19.
This was the consensus among manufacturers, exporters and business community, while talking to Business Recorder.
They said the pandemic and subsequent lockdown badly affected the businesses and the economy, so there was a need of 200 basis points reduction in policy rate to give some stimulus to the economy.
Chairman Pakistan Apparel Forum (PAF) Javed Bilwani said that there was space for reduction in policy rate by 200 basis points to bring it to five percent. The current policy rate of seven percent is of no help to the industry, which is already facing liquidity crunch owing to stuck up refunds.
Due to the Covid-19, followed by rains and floods in the country, exports shrunk, said Bilwani, adding that as demand reduced globally, competition in manufacturing sector increased, and the government needed to make it more competitive with regional competitors by reducing the input cost.
Shahid Sattar, executive director APTMA stated that there was more space for reduction in policy rate.
To attract investment and revive industry, further reduction in policy rate would be helpful, he added.
The All Pakistan Cement Manufacturers Association (APCMA), while hailing the SBP’s decision of keeping discount rate unchanged, urged the central bank to further reduce the discount rate and bring it at par with the regional countries to help boost local industry.
The Pakistan Association of Large Steel Producers appreciated the SBP’s decision of maintaining the interest and also hailed the prime minister of Pakistan and his team for providing further relief to the local industry.
It is quite encourage that the policy rate has continued to decline from 13.25 percent in early March to seven percent now.
However, the official of the Large Steel Producers Association said “we have to note that the prevailing regional discount rate is four percent and we have to bring it further down to the same level within the minimum possible time”.
The association hopes that the government was trying its best to support the LSM and will take further steps to encourage the struggling manufacturing sector of the country.
The Pakistan Hosiery Manufacturers and Exporters Association also welcomed the central bank’s decision to maintain discount rate at seven percent but stressed the need for further reduction in the policy rate, bringing it down to five percent.
The Pakistan Industrial and Traders Associations Front, while appreciating the SBP’s decision of lowering the discount rate to seven percent, said that this would spur economic activity, slowed down amid coronavirus.
Copyright Business Recorder, 2020