KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has warned the government that industry will opt black economy as formal banking channels are out of reach due to high interest rate.
FPCCI President Irfan Iqbal Sheikh in a statement explained that making formal and banking channels out of reach for businesses for their financing needs will give a boost to the informal economy.
He expressed his profound disappointment and concerns over an anti-business and anti-growth hike in the key policy rate, i.e. 100 basis points to 17 percent by the Monetary Policy Committee (MPC) of the State Bank of Pakistan a day earlier.
He said that the business, industry and trade community is shocked; and, clueless at the same time on how to cope with its fallout on economic activities, viability of doing business in Pakistan and its inevitable adverse impacts on exports – in the absence of any governmental support, incentives or facilitative mechanism for importers, industrialists and SMEs.
Sheikh explained that there is consensus among the economists that current wave of inflation is in no way a demand-pull phenomenon; but, by all indicators, it is a demand-push phenomenon. What we needed at the moment was an expansionary monetary policy; but, yet again, SBP has given a contractionary monetary policy.
FPCCI president emphasized that if the interest and export refinancing rates are not decreased drastically in Pakistan, we will not be able to compete with the regional countries as well.
Outlining the real factors, Irfan Iqbal Sheikh said that volatile rupee-dollar parity, uncertainty in political & economic environment and interest rate hike will totally crush the SMEs; as cost of doing of doing business, ease of doing business, access to capital, access to foreign exchange and remaining profitable will all be next to impossible for SMEs.
Irfan Iqbal Sheikh said if the authorities do not interfere immediately, there will be a lot of bankruptcies, many export orders would not be fulfilled, huge loss of employment opportunities; and loss of tax revenue will follow. He has called upon the authorities to instantaneously start a consultative process with all the stakeholders to find a workable way out of the current crises.