FPCCI disapproves rate hold, seeks downward revision

KARACHI: The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) on Saturday opposed the central bank’s decision to keep interest rate unchanged for the third time, saying the rate is very high compared to neighbouring countries.

Reduction in interest rate is essential to make exporting sector and local industry competitive, said Anjum Nisar, chairman of the FPCCI’s ruling group Businessmen Panel.

“Pakistan should take advantage of export orders canceled by regional countries. For this, the government will have to reduce production cost to avail this opportunity.”

Nisar said inflation is expected to decline due to low demand. The external front is also presently sustainable due to foreign financial support and rescheduling of debt that has supported reduction in current account deficit, he added.

The industrialist said most economic activity data and indicators of consumer and business sentiments have shown continued improvement. Inflation is expected to fall further within the previously announced range of 7-9 percent for FY21 and trend toward the 5-7 percent target range over the medium-term.

Nisar said the manufacturing recovery is becoming more broad-based, with 12 out of 15 sub-sectors registering positive growth in November and employment beginning to recover. While discussing the external sector, he said outlook for the external sector has improved further and the current account deficit for FY21 is now projected to remain below one percent of GDP.

Exports have also recovered to pre-COVID monthly level of around $2 billion since Sept, with a broad-based recovery in export volumes recorded in almost all categories in December, he added.

Nisar said the reduction in electricity tariff for small and medium enterprises is the first step towards cut in production cost while the second and vital step toward this direction would be bringing discount rate to the regional level to provide level-playing field especially to the export industry.

“The decision will have the same importance for the domestic industry too, as it has also been facing tough competition of cheaper imported merchandize in the country following free trade agreements with several countries, including China,” he added.

“Reduction in interest rate will be vital relief to the business community.” Nisar said SBP should take measures and develop a strategy to protect the pace of economic and trade progress otherwise the country might again face lower industrial growth and shift industrial units to the sick industry. “Reduction in interest rate will be a vital relief for the business community.”