The Pipa News
ISLAMABAD – The Islamabad Chamber of Commerce and Industry (ICCI) has slammed an interest rate hike to 17 percent by the State Bank of Pakistan. Ahsan Zafar Bakhtawari, president of the Islamabad Chamber of Commerce and Industry (ICCI), said that due to the current economic crisis and high prices for electricity, gas and petroleum products, the business community is already facing great difficulties as the cost of doing business has increased manifold. In these unfavorable business conditions, the State Bank of Pakistan further increased the interest rate to 17%, which will prove disastrous for business and investment activities, in addition to further increasing inflation for the common man. He said that in order to revive the economy, Pakistan needs an economic recovery, but a further increase in interest rates will make bank credit almost unavailable to the private sector, leading to a further contraction of economic activity.
Ahsan Bakhtawari said the interest rate hike would also increase Pakistan’s budget deficit and foreign debt, as a conservative estimate of a 1% increase in the interest rate adds 170 billion rupees to foreign debt. He said the interest rate in China is 3.65%, Bangladesh and Vietnam 6%, and India 6.25%, but Pakistan’s 17% interest rate is higher in the region, which will make our exports less competitive in the international market . He said developed countries including the US and Europe had kept the interest rate below 5%, but in Pakistan it was raised to 17%, which would put the private sector at a huge disadvantage.
He said the business community across the country has always demanded the government keep interest rates in the single digits to provide cheap credit to promote economic and industrial activities and attract FDI. He stressed that the National Bank of Pakistan should reverse its recent interest rate hike and consider further rate cuts to save businesses and the economy from further trouble.
Faad Waheed, senior vice president of ICCI, said no foreign investor would invest in Pakistan with such high interest rates. He said industry had to take loans from banks to buy machinery, equipment and other equipment, but further interest rate hikes would stunt the growth of industrial activity and reduce exports. He demanded that the government back off the interest rate hike to save industry and the economy from further damage.
Eng. Muhammad Azhar ul Islam Zafar, vice president of ICCI, said that builders and developers have to finance many construction projects through banks and that the interest rate hike will hit the construction industry. He called on the government to cut the key interest rate to single digits, which would pave the way for better business and economic activity and help revive the economy.