KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Thursday demanded the central bank to cut the policy rate by 400 basis points to five percent.
The State Bank of Pakistan (SBP) is scheduled to release monetary policy statement on Friday May 15, 2020. The central bank in past two months reduced the policy rate by 4.25 percent to present 9 percent.
FPCCI President Mian Anjum Nisar in a statement said that the State Bank of Pakistan (SBP) should bring down the interest rate to 5 percent.
He said that the future anticipated expected inflation will further decline due to low demand and other effects of lockdown to control over spread of coronavirus.
On the other hand external front is also presently sustainable due to foreign financial support and rescheduling of debt that has supported reduction in current account deficit.
The FPCCI chief further stated that with both demand driven and import based inflation in check there is no reason to gradually bring down the interest rates when the case for immediate relief is apparent.
He said economy of Pakistan is already hit very hard as business activities remain stop while they are paying 12 percent banks markup and cannot survive on such high KIBOR rate.
There is 4-5 percent interest rate in Pakistan immediate regional competitors China, India Bangladesh.
The SBP should also advice banks to revise KIBOR on a monthly basis instead of quarterly to pass on the benefit of lower rates faster to companies struggling to survive.
The impact to banks on their deposits will be insignificant as majority is demand deposits instead of time deposits.
Therefore, SBP lower interest rate to 5 percent in one go that is immediately reduction of 400 basis points rather lower in stages.
He said that tough situations under COVID-19 demand support while conditions rationally suggest lowing of policy rate directly to 5 percent.
While appreciating SBP role in sustaining economic growth through supporting trade and industry, Anjum Nisar emphasized upon financial relief by reduction in the interest rate.
He said State bank should take measures and develop strategy to protect the pace of economic and trade progress of Pakistan Other- wise we will again face economic crises, lower industrial growth and shifting of industrial units in sick industry.