ISLAMABAD: The Islamabad Chamber of Commerce and Industry (ICCI) has resented the State Bank of Pakistan’s decision of increasing the policy rate by 100 basis points to 13.25pc.
The chamber termed the recent hike “an unhealthy decision” as it would further enhance the credit cost for the private sector, increase the cost of doing business, discourage new investments and affect the overall economic growth of the country.
In a statement issued on Thursday, ICCI President Ahmed Hassan Moughal said that the interest rate has almost doubled since January 2018, which was not a good omen for the business sector.
“On one hand, the government is giving assurances that it will promote ease of doing business, but on the other hand, it is taking decisions that will create more difficulties for the private sector,” he stated.
The ICCI president said keeping in view the current situation of Pakistan’s economy, the government should have reduced the interest rate so that easy credit was provided to the private sector for expansion of businesses and better growth of economic activities.
“However, making 100bps hike in interest rate will add to the problems of private sector and discourage new investments, as no investor will like to invest in an environment of exorbitant credit cost,” he maintained.
Moughal said with an increase in the interest rate, banks would now prefer to invest in the government securities, which would bring risk-free high returns to them.
“This situation will squeeze credit availability for the private sector, leading to a further slump in business and economic activities.”
He urged the government to review the interest rate hike and take measures for creating an enabling environment for the private sector. “This is the only way to facilitate the growth of business activities, encourage new investments, improve exports and steer the economy out of troubled waters.”
He said the small and medium enterprises (SMEs) make the backbone of the economy, but they were facing great difficulties in access to finance as banks were not interested in providing credit to these businesses.
The ICCI president requested the government to focus on the provision of credit at reduced interest rates to the small and medium enterprises so that they could grow fast and play an effective role in the economic development of the country.