The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Friday said that the central bank could play its vital role by slashing its discount rate.
The move, the federation said, will give a breathing space to the industry and for the revival of economic activities. This will ensure affordable financing for industrial sector, said FPCCI President Zakaria Usman. He said the FPCCI had been continuously emphasizing that conducive environment was essential for commercial and business activities in Pakistan. He said that new monetary policy should be liberalised and made business-friendly.
The FPCCI president urged the government to reduce discount rate by 1 per cent in the forthcoming monetary policy of the State Bank of Pakistan. He said the graph of the business and productivity had been declined in lieu of sit-in at Islamabad and other cities, and the flood factor in all provinces of the country.
He said the cost of doing business was increasing day by day and similarly the non-performing loans of the banks were also increasing. He said due to prudent economic policies of the government, the inflation had been reduced during the current year which was directly related to the bank discount rate. The impact of decrease in inflation should be passed on to business sector of the country by reduction in the discount rate.
Usman also pointed out another fact that unfortunately the public money in commercial banks was being utilized to finance the fiscal deficit which was creating a saving- investment gap in the economy.
All economists are agreed that a widening saving-investment gap leads to several economic problems including unemployment, inflation and disinvestment. He said the public money should be utilised for enhancement of trade and investment activities through bank loans on easy rate of interest. He said it was very discouraging that currently private sector was reluctant to borrow from commercial banks due to high cost of borrowing from banks, energy crises, political instability and law and order situation while the government has been continuously borrowing from banks to finance its deficit which create liquidity problem for private sector.
Usman further indicated that after entering SAFTA and thinking about monetary union with the ECO block, the harmonization of rate of interest among these regional countries was essential for economic alliance. Unfortunately interest rate in Pakistan did not match with these countries, he added.