ISLAMAABD/LAHORE  -   The Islamabad Chamber of Commerce and Industry (ICCI) on Saturday slammed State Bank of Pakistan (SBP) for making steep hike in benchmark interest rate.

Muhammad Shakeel Munir, president of Islamabad Chamber of Commerce & Industry (ICCI), has slammed the decision of the State Bank of Pakistan (SBP) to make a steep hike of 2.5% in benchmark interest rate taking it to 12.25 percent and termed it a harsh measure as it would badly affect the growth of business activities and hurt exports. He said that the policy interest rate was 4% in India, 4.75% in Bangladesh, 3.7% in China, 0.5% in Thailand and 0.75% in Hong Kong, but it has been increased to 12.25% in Pakistan, which was almost the highest in the region. He warned that this massive hike in the policy interest rate would adversely affect all sectors of the economy and lead to further downfall in the trade and industrial activities. He urged that the SBP should immediately revisit and withdraw this irrational increase as it would prove disastrous for the economy. He said this while talking to a delegation of Fruits & Vegetables Market, Islamabad during their visit to ICCI. Muhammad Naveed Malik and Khalid Chaudhry, former Senior Vice Presidents, Muhammad Hussain, Vice Presidents ICCI, were also present at the occasion.

ICCI president said that our economy was already facing many great challenges including rising inflation, sharp currency devaluation, unbearable foreign debt, depleting foreign exchange reserves, growing fiscal imbalances and dwindling foreign direct investments. He said that in these circumstances, the government should have made significant cut in the benchmark interest rate to promote ease of doing business in order to revive the business and economic activities. However, the great hike in interest rate would make the credit cost unviable for the private sector due to which efforts to expand current businesses and make new investments would face massive hurdles. He emphasized that the SBP should reconsider its decision and reduce the interest rate to make credit cost affordable for business class. Jamshaid Akhtar Sheikh, Senior Vice President, and Muhammad Faheem Khan, Vice President ICCI, said that in the past, governments used the policy of increasing interest rate to control inflation, but this policy has failed miserably. They said that instead of controlling inflation, high interest rate would lead to rapid de-industrialization causing more slowdown in GDP growth. They urged that SBP should withdraw the massive hike in interest rate to save the economy from its disastrous consequences.

Tight monetary policy, rupee depreciation destructive for auto industry: PAAPAM

The Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) Chairman Abdur Razzaq Gauhar has deeply regretted the State Bank’s move to increase key policy rate by 250 basis points. He lamented that tight monetary policy along with rupee sharp depreciation will multiply the current woes of the auto parts manufacturers, who are already facing severe liquidity crunch owing to three-fold hike in cost of raw materials and sea freight. He requested that the interest rate should be brought back to single digit to encourage industrial expansion and growth, which will bring in fresh investments and create jobs for millions of young people entering the job market every year. “The 2.5% upsurge in the interest rate has shocked the auto parts industry across the country while incessant depreciation of rupee has further crippled the national economy in this prevailing political turmoil.

Abdur Razzaq Gauhar showed great concern for his fraternity, saying it would be hard to do business after this destructive policy in Pakistan. “We do not think any investor will veer to Pakistan under such economic uncertainties,” Gauhar added. An unprecedented and never-ending wave of inflation would force them to shift their operations seriously to business-friendly countries for survival. Inflated raw material, logistics, and energy would deeply affect the masses already struggling for the basics of life. The country has totally been left to IMF to suck the last drop of blood from the masses.

He appealed to the authorities to review these insensible people-killing monetary policies to ease the business community to enable them to move the wheel of the economy. He warned they were not far off the default if the corrective measures were not taken instantly.

Demanding the reversal of 2.5 percent increase in the interest rate, PAAPAM chairman observed that this rise will lead to a crisis of unforeseen proportions for the industrial sector in general and the auto parts sector in particular. The auto parts manufacturers are currently struggling to survive under the impacts of rising cost of raw materials & freight, deterioration of rupee exchange rate, higher minimum wages, and expensive energy. Several industrial units have already been forced to shut down their plants. The State Bank’s step may prove to be the last nail in the coffin, stated Razzaq Gauhar.