High interest rate had significantly raised the cost of doing business in Pakistan and businessmen were expecting hefty cut in policy discount rate in new Monetary Policy in line with international trend. However, just one percent reduction in interest rate has greatly disappointed the business community as it will not prove of any benefit to them.

These views were expressed by Mian Shaukat Masud, President, Islamabad Chamber of Commerce & Industry while presiding over a meeting of businessmen at ICCI. He said the new monitory policy is not an expansionary policy rather it is the continuation of the contractionary monetary policies adopted by SBP for the last three years, which proved seriously damaging for the business activities.

Businessmen were of the view that to control the damaging effects of current recession on the employment and investment, government should have announced an expansionary monitory policy so that with the expansion and growth of business and industrial activities, problems of unemployment and poverty could be tackled.

They said currently market interest rate in India is 3 percent, in USA 0.3 percent, in UK 0.9 percent, in Japan 0.4 percent and in Pakistan it is 13 percent, which still remains the highest in the world and called upon the government to look into it to bring it down to single digit level.

Mian Shaukat said Pakistan has the highest cost of borrowing in the world and this fact has also been confirmed by the Economic Intelligence Unit London, due to which industries are closing and businesses are shrinking. He said banking spread in Pakistan is 7.7 percent, which is also the highest in the world. In this state of monetary economy, trade and industry can not survive and compete in the international market, he opined.

However, he appreciated the increase in the review of the Monetary Policy from present 4 times to 6 times, which will enable the government to take corrective measures regarding money supply according to changing business environment.

He said power shortages have emerged as one of the most critical factors hampering economic activity in the country and government should reduce interest rate to create some room for improving the chances of economic recovery and to remove systemic risks for the financial sector as well.