Businessmen are disappointed over just one percent cut in discount rate

  • April 21, 2009
Business community was expecting discount rate to be brought down to single digit level. However, just one percent reduction in it has dashed all our hopes for good times to come. This was the unanimous opinion of local businessmen during a meeting held at Islamabad Chamber of Commerce and Industry to consider the pros and cons of monetary policy announced by the State Bank of Pakistan (SBP) on April 20, 2009 for the 4th quarter of current financial year. SBP reduced discount rate by 100 basis points or one percent from existing 15 percent to 14 percent. They said all major countries have made drastic cut in interest rates to stimulate their economies, but regretted that our government was still obsessed with tight monetary policy, which was proving very harmful for promoting business and economic activities in the country.

ICCI President Mian Shaukat Masud, Vice Presidents Shaban Khalid & Muhammad Ishtiaq Qureshi expressing their views said the trade and industry was facing unprecedented challenges due to high mark up rate and many other factors while the decrease made by the SBP in interest rate was just a peanut. They said there was a dire need to make hefty cut in the interest rate which would help boost up trade and industrial activities in the country which were at their lowest ebb due to multiple reasons including acute energy shortage. They said with reduction in discount rate, the financial cost of businessmen would come down and they would be able to pay back their loans with some ease. However, they appreciated SBP intention to bring undocumented part of the economy into tax net, which will help in improving government tax revenue.

Mian Shaukat Masud said high oil prices were the main cause of high inflation and stressed for the need of reducing oil prices along with slashing government profit on petroleum products. He said inflation would not decline until the oil prices are reduced in proportion to their reduction in international market. He also stressed upon the banks to provide easy credit on soft terms to large scale manufacturing because due to non-availability of banks loaning facility, LSM is showing negative growth which is not a healthy sign for the economy. He said reduction in policy discount rate will lead to decline in banks commercial rate and this will facilitate the smooth growth of trade and industry. He said the government should take the business community into confidence to prepare a road map for the revival of the country’s economy. He said without encouraging industrial sector, SBP hope to bring down inflation to 8 percent in fiscal 2010 would remain just a dream.