NA body advises govt to cut interest rate on farm loans

ISLAMABAD: A National Assembly’s body has advised the government to cut interest rates on agriculture loan and micro financing and bring them at par with an interest rate on credit to the private sector, its chairman said on Wednesday.   

Qaiser Ahmed Sheikh, chairman of the National Assembly’s standing committee on finance said banks are charging around 14 percent on an average on loan to farm sector, while industrialists get credit at 7 to 8 percent of markup. 

Borrowers of microfinance sector are also paying exorbitant markups, which must be brought down to single digit, Sheikh said, speaking at a pre-budget seminar, organised by the Centre for Policy Studies of Comsats. Sheikh further said exports sector is facing problems due to exchange rates. 

Talat Anwar, advisor of the Centre for Policy Studies said there is a power crisis because the government set power tariffs below the cost recovery level. The government is supposed to pay price differential amount as subsidy and it frequently fails to meet its obligation, resulting into generation of circular debt. Currently, circular debt stands at more than Rs337 billion, inhibiting independent power producers to generate electricity and aggravating power outage. 

Vaqar Ahmed, deputy executive director at Sustainable Development Policy Institute said the government’s planning strategies should shift from top-down to bottom-up strategies. 

Consultant Syed Sardar Ali said Pakistan lags behind other countries in south Asia in terms of outreach, depth and quality of microfinance credit despite a considerable expansion of the sector.  Ali, referring to a study of the Department for International Development, said interest rates charged to the poor borrowers remain high despite the fact that interest rate significantly declined for the rich investors. “Interest rate for poor borrowers increased from 26 percent in 2008 to nearly 35 percent in 2015,” he said. “There is a need to take a policy decision as to how interest rate can be reduced for the poor borrowers.”