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KARACHI: Business community has sharply reacted over the steep increase in interest rate by 2.5 percent to 12.25 percent in an emergency meeting and urged the Governor SBP to immediately revisit and revert it otherwise high interest rate would completely destroy industries and exports.

Chairman Businessmen Group (BMG) Zubair Motiwala and President Karachi Chamber of Commerce & Industry (KCCI) Muhammad Idrees, while highly criticising the State Bank’s move to exorbitantly raise the interest rate by 2.5 percent to 12.25 percent in an emergent meeting, urged Governor SBP to immediately revisit and withdraw this irrational increase as it would prove disastrous for the economy, exports and the industries.

They stated that the entire business & industrial community was in a state of shock to see SBP’s anti-business, anti-economy and anti-exports move which has been taken particularly in a situation when the country’s economy was not so bad. State Bank’s autonomy doesn’t mean that it was free to take such a harsh step overnight which has never happened in 25 years’ history.

It was highly unfair to abruptly and exorbitantly raise the interest rates without bothering to hold consultation with the stakeholders, they said, adding that the Karachi Chamber, from time to time, requested Governor State Bank to visit KCCI so that numerous monetary issues and central bank’s policies affecting businesses could be discussed in detail but, unfortunately, Governor SBP has no time to discuss some of the most pressing issues being suffered by the business community of Karachi.

They noted that last month, Pakistan’s exports recorded an increase of 29.1 percent on Month-on-Month (MoM) basis as compared to last year which clearly indicates that the export sector was performing very well but now, the increase in interest rate would have a deep negative impact on the export performance.

It will be completely disastrous for the industries and future investments as nobody would come forward to set up any industry due to exorbitant interest rate and the high cost of doing business which was going to bring the survival of businesses at stake, they cautioned.

Chairman BMG and President KCCI said that the extortionate increase in the interest rate seems like an attempt to completely shut down the industrial and export activities.

Is the State Bank intending to completely block the desperately needed foreign exchange being earned through exports and bring Pakistan’s economy at par with the Sri Lankan economy, they asked and advised the SBP to compare Pakistan’s excessive interest rate with the global interest rates which, we fear, would cool down the economic activities.

They said that the decision to increase the interest rate has been taken to contain inflation but keeping in view the ground realities and the overall high cost of doing business, the business and industrial community firmly believes that enhanced interest rate would prove counter-productive by further nurturing the inflation.

Zubair Motiwala said, “As leader of the business community of Karachi, I fervently demand that the decision to raise the interest rate must be revisited which is purely not in the interest of the country hence it has to be taken back while the SBP must also hold consultations with the stakeholders prior to imposing such decision directly affecting the business and industrial activities.” Muhammad Idrees said that the increase in dollar value was due to political turmoil, not because of poor economic performance which has not yet been suffered by impact of rising oil prices hence, the State Bank must refrain from creating more problems for the economy.

President of Korangi Association of Trade and Industry (KATI) Salman Aslam has expressed concern over the sudden increase in interest rate by SBP by 2.5% and setting the policy rate at 12.25%.

He said that the unexpected meeting and decision of the Monetary Policy Committee would cause irreparable damage to the economy.

Salman Aslam said that already due to increase in production cost, stabilisation in electricity, gas and petrol prices, it is very difficult to compete with other countries in the region including India, China and Bangladesh. Salman Aslam said that increase in interest rates, export orders are also likely to be affected due to which the wheel of the industry is becoming extremely difficult to move.

The country’s economy is already under pressure due to the political crisis. In such a scenario, the abrupt rise in interest rates by the SBP is beyond comprehension. He said that in view of such measures, there were concerns over the undue autonomy of the SBP in the business community.

President KATI appealed to Prime Minister Imran Khan and Finance Minister Shaukat Tarin to take immediate notice of the increase in monetary policy rate.

He said that due to political instability, the value of the dollar had reached an all-time high and a significant increase in interest rates was tantamount to inviting a major storm of inflation.

Salman Aslam said that the people of Pakistan and the business community could not afford further inflation. He said that industrialists and traders were facing economic crisis and raising interest rates above 12 percent would completely destroy industries and exports of the country. Expensive bank loans will further increase the cost of production.

President KATI also appealed to the Governor SBP to immediately reverse the interest rate hike in the best interest of the economy.

The United Business Group has termed the decision of SBP to raise interest rates to 12.25% on emergency basis as catastrophic for the national economy.

In their response to the increase in interest rates, Patron in Chief S M Muneer and President UBG Zubair Tufail said that after the two and a half percent increase in interest rates, interest rates in Pakistan have become the highest in the region therefore the decision should be reconsidered immediately.

S M Muneer said that the alarming rise of 2.5 percent in interest rates would create difficulties for industries and the cost of production would become unbalanced as the interest rate in neighbouring like India was 4 per cent while in Bangladesh it was 4.75 percent and in Sri Lanka it was 6.5 percent. The interest rate in Bhutan is 7.16 percent and thus the highest interest rate in the region is in Pakistan which should be reduced immediately.

Copyright Business Recorder, 2022

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