LAHORE: The Lahore Chamber of Commerce & Industry (LCCI) has said that unprecedented increase in markup rate would put all businesses in deep trouble.
In a statement, LCCI President Kashif Anwar, Senior Vice President Zafar Mahmood Chaudhry and Vice President Adnan Khalid Butt said that the State Bank of Pakistan has made another policy hike which has taken the policy rate at 21%. The LCCI warns 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.
They said the 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 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.
Meanwhile, they said the State Bank of Pakistan has recently issued FE Circular No 02 of 2023 on March 31, 2023 regarding the realisation of export proceeds.
According to the circular, in case of delays in bringing the export proceeds into the country, there will be fines ranging from 3% to 9% on realised export proceeds. The LCCI is of the view that this measure will adversely impact the exporters who are already facing steep and multi-dimensional challenges due to the rise in cost of doing business.
This measure is completely unjustified as there are often delays in export proceeds due to the circumstances which are well beyond the control of exporters. This measure will ultimately affect the competitiveness of our exports in the international market. The LCCI requests the State Bank of Pakistan to review this measure in the best interest of our exports.
Copyright Business Recorder, 2023