FPCCI shows concern over the declining of private sector credit

Karachi, November 27, 2019: Engr. Daroo Khan Achakzai, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) showed his serious concern over the declining of private sector credit by Rs 4.1 billion in the first four-month of the current fiscal year.

He stated that the declining demand for private sector credit is due to the high cost of borrowing and slow economic activity in the country which will subsequently affect the next year’s economic growth and unemployment.

 While commenting on the monetary policy, he added that State Bank of Pakistan is continuously adopted contractionary monetary policy and keep the policy rate at 13.25 percent while on the other side the government has declined profit rates on the National Saving Schemes (NSS) which are discouraging the saving environment in Pakistan. He added that declining lending rates on saving and high borrowing rates benefit the banks in terms of high spread.

He further added that Savings are the backbone of investment viz., higher savings lead to higher investment and higher growth in an economy provided that the other macroeconomic variables are conducive and a developed financial system exists in the economy.

He underlined the need for declining of the policy rate in Pakistan which is very high compared to regional economies like the policy rate in India is 5.15 percent, China 4.35 percent Sri Lanka 8.0 percent, Malaysia 3.0, percent Thailand 1.25percent, Indonesia 6.5 percent, etc.

He stated that the SBP keeps the high-interest rate due to inflationary outlook while in Pakistan the inflation is cost-push that can not be controlled through contractionary monetary policy. He urged the SBP to decline the policy rate in order to increase the demand for private sector credit which will ultimately help in new industrialization and increase in economic growth rate.

He appreciated the efforts of the government for eliminating the current account deficit and zero borrowings from central bank which indicates the availability of credit for new investment. As the business environment has improved in Pakistan but now there is a need for promotion of new investment in real sector and SMEs which will help in creating economic stability and development in Pakistan.

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