LAHORE - There has been widespread reaction to the surprisingly significant slash in interest rates announced by the State Bank of Pakistan on Saturday.
The manufacturers, business community and financial experts have said that the cut in interest rates, from 13.5 percent to 12 percent, is an extremely bold move and shows that the central bank appreciates the seriousness of the situation.
While welcoming 1.5 per cent cut in policy rate, after a long period of eight years, the business community said that it is the first step towards the revival of economy and the industry.
But more needs to be done, stated the APTMAs newly-elected central chairman Mohsin Aziz. I think that interest rates need to be cut to the unprecedented one digit level, and quickly, he added.
He said that rates have never before been this low, but extraordinary times require extraordinary action. And it is not impossible to imagine circumstances under which rates end up having to go lower, perhaps even to single digit as our competitors have done in India and China.
He said that with a fall in inflation expected in the coming days, the interest rates needed to be cut further. This reduction in the policy rate will provide some support to the industry
He, however, hoped that after two months when new monetary policy would be announced, the interest rates would further be lowered to single digit.
LCCI President Irfan Qaiser Sheikh said that the step taken by the State Bank of Pakistan would help strengthen the economic indicators.
The LCCI President also thanked the Prime Minister Yousuf Raza Gilani for accepting the Lahore Chamber of Commerce and Industry demand regarding drastic cut in the markup rate. It is pertinent to mention here that two days back, in his one-to-one meeting with LCCI President Irfan Qaiser Sheikh, had raised the issue of high mark up with the Prime Minister Yousuf Raza Gilani, who had categorically assured to bring down the mark up rate.
The LCCI President said that the Prime Minister had proved that he was ready to go to any extent for the revival of the economy and the industry in the country.
The LCCI President said that the availability of cheaper liquidity to the business community was need of the hour as in the last five years SBP tighter monetary policy stance in the name of financial discipline had failed to give any results.
He said that the provision of ample cheaper liquidity is a must to create new businesses but in the last five years the higher interests kept the private sector growth at the lowest ebb causing huge damage to the businesses and unemployment graph also witnessed an unusual surge.
The President urged the Governor State Bank of Pakistan to review all other economy related banking policies and facilitate the private sector that is engine of the growth. He said that in the developed economies, the markup rate is in single digit and they are maintaining it at all costs in the larger interests of their respective economies. Therefore, the Governor State Bank of Pakistan should bring it to single digit in the monetary policy to be announced after two months.