APTMA seeks 350bps cut in discount rate

LAHORE: All Pakistan Textile Mills Association (APTMA) leadership has demanded 350bps cut in discount rate in the Monetary Policy to be announced on October 05 (Friday).

Talking to media, the APTMA leadership including Gohar Ejaz, Group Leader, Ahsan Bashir, central Chairman, Wisal Monnoo, central Vice Chairman and Shahzad Ali Khan, Chairman Punjab region have stressed that the issue of Rs652 billion industrial Non Performing Loans (NPLs) would only be resolved by such a drastic cut in the discount rate.

It may be noted that the federal government has already slashed the discount rate by 350bps in February and August last respectively in line with the APTMA guidelines for industrial growth and sustainability.

And now, the APTMA has come up with a novel idea of cutting discount rate by another 350bps, preferably in two phases in the months of October and November.

Gohar said the industrial credit off-take has been equivalent to Rs. 1.3 trillion during August 2012 and the corresponding period. It means that the industrial growth has been stagnant during this period, he said, adding that the other segments of economy have also been declining sharply. Only the government borrowing from the government sector has been on the rise otherwise loaning to business community reduced by 4 percent in last four quarters.

Gohar said the previous reduction of 350bps was only a breathing space to the existing manufacturing sector.

Interestingly, he said, the inflation rate has come down to 8.8 percent today despite a drop in the interest rate since the start of 2012. On the other hand, he said, the unemployment has increased by 4 percent now.

Central Chairman APTMA Ahsan Bashir further pointed out that the regional rate of interest in countries like Bangladesh, India and Sri Lanka is in the vicinity of 7 percent. In Pakistan, interestingly, the banking spread is yet 7 percent, which should not be more than 3 percent as per world standards.

According to him, the businessmen in India are receiving 5 percent rebate from the central government while the regional states were offering another seven percent rebate to the millers to attract them to their regions. Gohar said the government should reduce the discount rate by 350bps and monitor the impact on industrial growth that would ultimately boost the economy.

Gohar said job creation is the utmost need of the hour and there is thumb rule that for each one million jobs you need an investment of Rs100 billion. Only then the country can be viable economically, he asserted.