ISLAMABAD: The Islamabad Chamber of Commerce and Industry has hailed the 100 basis point cut in policy rate that brought it down from 8 percent to 7 percent, and termed it a positive initiative, as it will decrease the cost of doing business, encourage new investment and spur better economic growth in the country.
Islamabad Chamber of Commerce and Industry President Muzzamil Hussain Sabri said that after the recent recession, many countries made drastic cuts in policy rates to restore economic activities. However, credit cost for private sector in Pakistan mostly remained high due to high discount rates, which was a major constraint for growth of business activities.
He said that cutting policy rate to 7 percent will prove to be beneficial for the economy, as it will decrease input cost of businesses and facilitate easy credit availability to the private sector.
He said that the State Bank of Pakistan (SBP) should also ensure that banks focused on private sector lending because the first requirement for the policy rate to be effective was that credit should predominantly be utilised by the private sector for boosting business activities.
He said the banks’ lending to the private sector decreased by more than 36 percent during the first nine months of the current financial year, as businesses received only Rs 178.8 billion credit from July 2014 to April 2015 as compared to Rs 281.9 billion during the same period of last year. However, he was hopeful that with this historic cut in policy rate, the private sector credit will pick up pace that will help in triggering the expansion of current businesses as well as attraction of new investment.
Muzzamil Sabri said that Pakistan’s industrial sector was in urgent need of balancing, modernisation and replacement of machinery and technology to produce quality products at par with international standards, and added that cut in interest rate will help them in upgrading technology and machinery.
