ISLAMABAD        -             Islamabad Chamber of Commerce and Industry (ICCI) has called upon the government to immediately reduce policy interest rate to single digit level in order to save businesses from the negative impact of coronavirus.

Islamabad Chamber of Commerce and Industry (ICCI) president Muhammad Ahmed Waheed, said that coronavirus has caused significant slowdown in business activities in Pakistan due to closure of borders, therefore, businesses urgently needed low interest rate to sustain business activities and plan for expansion.

He said due to impact of coronavirus, US, Canada, UK, China and many other countries have cut interest rates, but SBP has reduced policy interest rate by only 75 basis points which was very insufficient.

Muhammad Ahmed Waheed said that USA has brought down interest rate to almost zero level and announced a program of $700 billion to save economy from further troubles.

Similarly, Australia has announced a stimulus package of $17 billion, but no solid relief measures have been announced in Pakistan for business sector as yet. He said IMF and other international institutions have predicted for further slowdown in the economic growth of Pakistan due to coronavirus and in these circumstances, government should immediately reduce interest rate to single digit level to stimulate business activities.

He said that oil prices in international market have come down significantly and urged that government should pass on their full benefit to the general public for reducing POL prices in the country. It would also bring down production cost and reduce inflation for people.

Tahir Abbasi, Senior Vice President, and Saif ur Rehman Khan, Vice President ICCI, said that to cope with the challenges of coronavirus, many countries have announced stimulus measures for private sector and Pakistan should also come up with some supportive measures for businesses in the country.

They also emphasized that keeping in view the current difficulties caused by coronavirus, IMF should either waive off Pakistan’s debt or reschedule it for long-term period to enable Pakistan to save its economy from further problems. 

Meanwhile, Pakistan Industrial & Traders Associations Front has appreciated the State Bank of Pakistan’s decision of lowering the discount rate by 75 basis points to 12.5 percent, terming it a good sign, observing that the central bank was doing a right move but that was not enough to attract investment in the industry.

PIAF chairman Mian Nauman Kabir, in a joint statement along with senior vice chairman Nasir Hameed and vice chairman Javed Iqbal, said that the PIAF had been demanding at least 200 basis points cut in the discount rate, but they still believe that the decision would help boost economy.

He said that by cutting down the discount rate by just 0.75 percent the country cannot promote exports. However, the nominal cut in discount rate would also yield some positive impact.

Nauman Kabir said that in the last monetary policy announcement the SBP kept the interest rate unchanged at 13.25%. He said that the cost of doing business and cost of production have shot up to the level of un-competitiveness. Under this, the cost of borrowing is huge and capital financing become more expensive. He said that a significant cut of at least 2 percent in the discount rate could have injected fresh blood to the industrial sector which was facing a number of internal and external challenges.

Mian Nauman Kabir said that the State Bank approach toward monetary policy had been rather conservative and is based on its own analysis of the situation. The government must come up with concrete policies to reduce rampant corruption in state-owned organisations, eradicate poverty and unemployment. He urged the governor SBP to review all other economy related banking policies and facilitate the private sector that was engine of the growth.

PIAF Senior vice chairman Nasir Hameed stated that cut in discount rate in monetary policy will spur the economic activities. He said that reduction in interest rates cuts cost of production, strengthens debt repayment ability and improves the credit worthiness. This encourages businessmen to make investment in the productive activities, increasing the wealth of the nation.

Nasir Hameed observed that such initiatives also result in job creation, leading to increased employment opportunities. Such financing helps businessmen enhance their working capital and better manage their inventory, he added. He believes the decrease in borrowing costs coupled with the decline in energy price may raise the exports by 15 to 20 per cent in times to come.

Nasir Hameed said the government should bring down electricity rates, logistics in the falling oil price scenario.

PIAF Vice chairman Javed Iqbal said that lower interest rate triggers borrowing and investments. He added that excessive use of bank borrowing by the government led to excessive rate of inflation, reduced the supply of credit to the private sector and increased the nominal lending rates, reflecting high inflation, attractive return offered by the government and high interest rate spread.

He stated that the SBP would have to make a large cut in interest rate for the revitalisation of the country’s economic growth.

Javed Iqbal said that Pakistan has no employment generation, as industries are being closed down and non-performing loans are rising, posing a threat to industrial growth.