LAHORE: The Lahore Chamber of Commerce and Industry has expressed fears that sharp and repeated hikes in interest rate will badly hit trade and industry.
LCCI executive committee in its meeting on Thursday said that the State Bank of Pakistan is planning another policy hike which will take the policy rate well beyond the prevailing high rate of 20%.
The LCCI warned that this can have dire consequences for the growth of trade and industry. It will adversely impact the process of industrialisation, private sector growth and result in rapid de-industrialisation across the country.
LCCI President Kashif Anwar, Senior Vice President Zafar Mahmood Chaudhry and Vice President Adnan Khalid Butt said that LCCI is of the view that instead of trying to control inflation by increasing the interest rates, the best way to reduce inflationary pressures is by increasing domestic production, industrialisation and export growth.
Kashif Anwar said that the prevailing policy rate in Pakistan is already much higher than other economies in the region. This essentially means that access to finance which is imperative for the growth of industry and trade is already more expensive in Pakistan as compared to other economies in the region.
They said that since the government is the biggest borrower in Pakistan, further increase in policy rate beyond 20% would massively escalate the borrowing cost of the government, resulting in further worsening of fiscal deficit.
The LCCI office-bearers said that hike in markup rate brought borrowing cost to the highest in the last six years.
“How our industry can compete to France, Germany, Spain, Austria, Ireland, Japan and various other countries where markup is zero or below the zero,” LCCI office-bearers questioned and said that markup rate should be single digit to give a jumpstart to the economic activities and to ensure cheap financing for industrial sector. They said it is now before all of us that high markup rate is no more sustainable as it has been causing an immense harm to economy and will continue to do so unless and until a realist approach is adopted.
They said that despite higher inflation all the major economies have either curtailed or are in the process of reducing high interest rates to protect their economies. They said that the State Bank of Pakistan should understand that its continued tighter stance is inflicting a very heavy loss on the nation as the economy has already paid a very high price because of high interest rate.
Copyright Business Recorder, 2023
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