KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI), the country’s top trade body, on Saturday rejected the central bank’s decision to raise the interest rate to 12.25 percent, saying that the decision would not go in favor of national businesses and industries.
Ifran Iqbal Sheikh, chairman of the FPCCI, said companies had already been deprived of government support and that the hike in key rates by the State Bank of Pakistan (SBP) would add to their difficulties. “Business, industry and the trading community are both shocked and bewildered on how to deal with its fallout on economic activities, the viability of doing business in the country and the inevitable negative impacts on exports” , Sheikh said. He said raising the interest rate could not be justified to stop the current wave of inflation. “This [inflation] was due to political uncertainty and a lack of direction in economic policies.
The FPCCI Chairman added that Pakistan’s policy rate was relatively higher than countries in the region such as Malaysia at 2%, China at 3.7%, India at 4% and Bangladesh at 5%.
“Pakistan will not be able to compete with countries in the region with high interest and export refinancing rates.”
He explained that it was the demand of the business world, even before the recent rise in interest rates, that the key rate be gradually lowered by 9.75% to ensure the availability of capital to companies at lower rates and affordable.
“Contrary to what was necessary, the interest rate has now been raised to 12.25%, which will put a stop to economic and commercial activities in the country,” he lamented.
Highlighting three factors, Sheikh said the volatile rupee-dollar parity, uncertainty in the political and economic environment and rising interest rates will totally crush SMEs; as the cost of doing business, ease of doing business, access to capital, access to foreign exchange and maintaining profitability will be nearly impossible for SMEs. The President of the FPCCI reiterated that if the policy rate had not been lowered, there would be bankruptcies, unfulfilled export orders, loss of tax revenue and loss of employment opportunities.