LAHORE – The industry and chambers on Friday termed 50-basis point cut in markup as meager and half-hearted attempt to rejuvenate economy as the businessmen want State Bank to bring it to the level of regional countries of 7 per cent.

The All Pakistan Textile Mills Association (APTMA) leadership including Gohar Ejaz, group leader, Ahsan Bashir, central chairman, and Shahzad Ali Khan, chairman Punjab, stressed that the issue of Rs652 billion industrial Non-Performing Loans (NPLs) would only be resolved by a drastic cut in the discount rate. The textile industry leaders said that the SBP Governor should have taken some bold steps and curtailed it to at least 250 basis points to 7 per cent. “This decrease will hardly improve the local investment scenario.”

Goahr Ejaz said that for government, it means decrease in debt-servicing costs as it is the biggest borrower. The slash in interest rate in August last trimmed the government debt-servicing by over Rs40 billion. But for the private sector it is not very encouraging.

He observed that the availability of liquidity to the business community is need of the hour as the SBP tight monetary mantra in the name of financial discipline had already caused irreparable dent to the private sector growth and brought in an unusual surge in unemployment. Central Chairman Ahsan Bashir pointed out that neither any industrial expansion took place nor any investor put money in any new business venture. And one of the reasons was expensive credit cost to the private sector, keeping the industrialists on sidelines, he observed.

Ahsan Bashir said that the regional rate of interest in countries like Bangladesh, India and Sri Lanka is in the vicinity of 7 per cent. In Pakistan, interestingly, the banking spread is yet 7 per cent, which should not be more than 3 per cent as per world standards.

According to him, the businessmen in India are receiving 5 per cent rebate from the central government while the regional states were offering another seven per cent rebate to the millers to attract them to their regions.

Lahore Chamber of Commerce and Industry president Farooq Iftikhar said that there is no expansion to industry and many units are already closed down due to double digit interest rate and unprecedented energy crisis. He said private sector has been crowded out from the bank borrowing and there were no other sources of funding because the capital market is shallow and the only option left for the industry was equity investment. He said Pakistan’s industry was unable to compete with regional textile industry due to huge gap of financial cost of doing business.

Farooq Iftikhar said the government should reduce discount rate by 250bps and monitor the impact on industrial growth that would ultimately boost the economy. He said job creation is the utmost need of the hour and there is thumb rule that for each one million jobs you need an investment of Rs100 billion. Only then the country can be viable economically, they asserted.