LAHORE - The Rice Exporters Association of Pakistan, hailing the move of the State Bank of Pakistan to slash its benchmark interest rate by 150 basis points to 10.5 per cent, has asked the central bank to also cut the rate of Export Refinance to bring down cost of doing business of exporters.

The REAP Chairman Javed Islam Agha said that cut in policy rate to 10.5 per cent is a first step towards enhancing export and reviving industry in the country. He emphasised the need of further cut in interest rates to bring it down to single digit. Malik Mohammad Jahangir, Ex-Chairman-REAP said that it is a welcome move from the SBP, as the central bank has accepted the demand of the business community by lowering the rate.

He said that although State Bank has announced a decline in basic policy rate considerably, the level of interest in Pakistan still highest in the world.

Agha said that currently market interest rate in India is 3 per cent, USA 0.3 per cent, UK 0.9 per cent, Japan 0.4 per cent and it is 10.5 percent in Pakistan, he quoted. Due to high discount rate in the region and in the world, the production of Pakistan had become uncompetitive. He said that business community, for a long time, had been demanding the reduction in the discount rate to lower the cost of production, which is badly affected by various reasons, including the high discount rate.

Ex-chairman Malik Mohammad Jahangir expressed that political stability, sufficient energy and controlled law and order are must along with cut in interest rate for creating investment climate in Pakistan. He said that the availability of interest free loan would even not work for industrialisation in the country if stability on said fronts was not guaranteed by the rulers. He said that the rate cut might have made the financing cost manageable for new ventures in the industrial sector.

He said reduction in government’s borrowing from banks is a must for expediting investment process in the industrial sector. He hoped that SBP would finally reduce the discount rate to below nine percent considering the mounting non-performing loans which have now crossed the alarming level of Rs500 billion mainly due to closure of industry. He recommend the government to come up with clear cut energy security plan for next 20 years to be shared and approved by all political parties of Pakistan and finally to be approved by the Parliament thus all political parties whether in the government or not would be responsible to follow and implement the proposed energy security plan.