Lahore
The Ferozepur Road Industrial Association (FRIA) has called for a significant cut in the monetary policy rate to attain the high position in Ease of Doing Business ranking, amidst high markup rate and rising energy prices.
In a statement issued today, FRIA senior vice chairman Shahbaz Aslam said that the already high cost of production has drastically reduced private sector borrowings during the outgoing fiscal year, besides the country has been far behind in the ease of doing business ranking. So, a major cut in markup rate was due, as constant high discount rate has been deteriorating the economic conditions, he added.
He said the SBP had kept the rate very high for the last many years, mainly to curb soaring inflation. However, it started holding rates steady for some time saying inflation had down in this period. It decreased rates by 400 bps at recent meeting in an effort to secure IMF funds, citing slightly deteriorated inflation outlook.
The FRIA SVC said that the central bank, in the past, constantly raised its key interest rate, exceeding investor expectations, as the cash-strapped country attempts to encourage the International Monetary Fund (IMF) to release critical funding.
The key rate of the State Bank of Pakistan now still highest in the region. Now, there are reports that the SBP would cut the interest rate at the upcoming meeting of the Monetary Policy Committee (MPC), which is encouraging.
Shehbaz Aslam suggested the central bank to adopt an accommodative monetary policy stance, asking the finance minister to fulfill his commitment of reining in inflation besides cutting interest rate and strengthening the undervalued local currency against dollar.
He said the SBP had adopted a wrong way of dealing with inflation as high discount rate would jack up the cost of doing business that would ultimately hit the economic growth.
With weaknesses in private capital inflows continue to persist, the Central Bank should announce major cut in policy rates to spur growth, as cut would infuse confidence in the business community and propel economy which was hostage to the past policy of austerity.
