24pc increase in loans alarms APTMA

All Pakistan Textile Mills Association (APTMA) Chairman Mohsin Aziz, while commenting on report of State Bank about non- performing loans (NPLs), said abnormal surge of more than 24 per cent increase in NPLs, from Rs494 billion to Rs629 billion, in just one year was alarming and disappointing. In a statement issued, he said reasons for such an abnormal increase in NPLs were twofold: higher interest rates being the basic cause, and second being shortage of utilities supply. He said because of these reasons industry was not performing, which resulted in abnormal increase in NPLs.
APTMA Chairman was gravely concerned over impact of NPLs on textile industry, which was already struggling for survival in unfavorable atmosphere prevailing in the country. He said textile industry, being capital and labour intensive was not performing well because of high interest rates. Recent reduction of discount rate of just two per cent was totally insufficient for investment. He said reduced gas supply to textile mills, in Punjab particularly where textile units are concentrated, had crippled this industry.
He lamented the fact that more than 120 days in the current year textile mills in Punjab were either closed or running at very low capacity. Such a sorry state of affairs, he emphasised, should not be allowed to continue as it would lead to a loss in major export earnings from textiles. It would also cause massive unemployment, he believed. If high interest rate is not addressed and is not brought down to a single digit figure clubbed with control on power shortages to textile industry, not only would NPLs grow, but simultaneously it would also result in stagnation of exports, he said. This in turn would lead to a very low growth rate of 2-2.5 per cent which had peaked at 8.5 per cent a few years ago – the required rate for a developing country like Pakistan – he added. He said impact of such increase in NPLs on industry further damages industries’ image in banking sector, as it restricts banks from extending further loans to the industry, in which BMR is essential to keep product in line with technologically advancing world requirement.
He therefore, stressed upon government – especially state bank – and all economic ministries to look into this state of affairs, very seriously. Both, reduction of interest rates and power shortages, if not addressed urgently will have drastic irreversible consequences, he concluded.