The industrial sector representatives have welcomed the central bank’s decision of lowering discount rate by 100 basis points to 7 per cent and bringing it to almost level of regional countries but demanded the immediate notification of Export Refinance Scheme pending for a long time, besides initiating the Long Term Finance Facility (LTFF) and Investment Credit facility for yarn manufacturers.

“The reduction in policy rate by 100 basis points will provide relief to the industry, especially the liquidity-starved textile industry which is already facing high cost of doing business in the region,” they added. They said this is high time for the government to announce Export Finance Scheme (TFS) and the Long Term Finance Facility (LTFF) for the textile industry to encourage fresh investment in the sector. An earlier notification of the investment instruments like TFS and LTFF would lead to new openings in the textile sector.

They also urged the government to include the spinning industry in the two above-mentioned schemes as the liquidity crunch has played havoc with this industry. There is an urgent need of balancing, modernization and replacement (BMR) of the spinning industry in Pakistan.

They further said the State Bank of Pakistan has laid the foundation for implementing a growth-oriented economic regime by cutting its key interest rate to a 42-year record low of 7%. This reduction in the policy rate would promote business activities with reduction in the input cost.

They said that the reduced discount rate would also make existing industry to go for balancing, modernization and replacement (BMR). Similarly, the capital market would also get a fresh impetus as it would attract huge funds parked in banks and other investment schemes.

Aptma’s SM Tanveer said that the cut of 100 basis points would give a direct benefit to government which is the sole largest and biggest borrower from the banking.

He demanded that these Long Term Finance Facility (LTFF) and Investment Credit facility given to downstream industry should be given to the yarn manufacturers also, who are facing same cost increases as other sectors of textile industry.

Ferozepur Road Welfare Industrial Organization (FRWO) chairman Adeeb Iqbal Sheikh said that the lower discount rate would encourage investment. Fall in petroleum rates has already slashed cost of doing business. “The simultaneous fall in POL products price and a cut in discount rate by 100 basis points will stimulate economy,” he added.

Adeeb Sheikh projected a positive impact on Gross Domestic Product (GDP) and exports. He endorsed his views and added it will bring down cost of doing business. He further stated that lower the interest rate, higher the business activity.

He said that the large-scale manufacturing sector, which grew 2.2% in the first seven months of 2014-15, is expected to gain traction due to the rate cut and low prices of raw materials.

He said that industrial growth cannot be achieved unless credit availability is made easy. Along with cutting the interest rate, the SBP should also ensure that banks increase their lending to the small and medium-size businesses, which are the real engines of economic growth,” FRWO chairman stressed.

Director IHA Sardar Usman Ghani said that cut in interest rate will help stimulate private sector growth. He also called for measures to make interest rate cut meaningful and result oriented as if the other economic factor were not taken, they would continue to create problems for the economy in general and for the private sector in particular.

 Usman said that the provision of ample cheaper liquidity is a must to create new businesses but in the last five years the higher interests kept the private sector growth at the lowest ebb causing huge damage to the businesses and unemployment graph also witnessed an unusual surge. He urged the Governor State Bank of Pakistan to review all other economy related banking policies and facilitate the private sector that is engine of the growth.

LCCI President Ejaz Mumtaz said that perhaps the Lahore Chamber of Commerce and Industry (LCCI) is the only chamber of commerce in the country that had termed a considerable cut in policy rate a panacea to low investment phenomenon.

The LCCI President said that the cut will help ensure availability of cheaper money to cash starved private sector besides encouraging the potential foreign investors for investment in Pakistan.