The Lahore Chamber of Commerce and Industry Friday expressed its dismay over hefty increase of 2.5 percent raise in markup rate saying that in the present economic scenario, the business community was expecting a cut but the State Bank of Pakistan has further increased it. In a statement, President of the Lahore Chamber of Commerce & Industry Mian Nauman Kabir said that 2.5 percent increase would hit all sectors of economy hard. The State Bank of Pakistan should withdraw massive hike in mark up rates and bring it to single digit to encourage new investments, for revival of businesses and to give a jumpstart to the economy which is at standstill. He said that the increase in markup rate would have dire consequences on our economic growth rate. It will surely hinder the process of Industrialization and private sector growth. Pakistan should bring its markup rate at par with the regional rates which are much lower.
Mian Nauman Kabir said that being the premier business support organization of the country, LCCI is of the view that the Monetary Policy of the country should support Industrialization. Unfortunately in the past, the successive Governments used the policy of increasing interest rates to control inflation. This policy failed miserably. Instead of curbing inflation, this policy of increasing the interest rates resulted in rapid De-Industrialization in the country, resulting in negative GDP growth rates.
“The markup rate of 12.25% prevailing in Pakistan is considerably higher than other economies in the region (India 4%, Bangladesh 4.75%, China 3.7% and Sri Lanka 5%). This essentially means that access to finance which is imperative for the growth of industry is already more expensive in Pakistan as compared to other economies in the region. It is worth mentioning that the credit availability to private sector in Pakistan is currently only 17% of GDP which is also the lowest in the region”, the LCCI President added.
He said that since the Government is the biggest borrower in Pakistan, any increase in interest rate also increases the borrowing cost of the Government, resulting in worsening of fiscal deficit. The fiscal deficit in Pakistan is already in excess of 8% of GDP. He said that high markup rate is one of the biggest reasons of high input cost of the industrial sector. Resultantly, Pakistani merchandise facing hard competition in the international market.
Mian Nauman Kabir said that it was very unfortunate that tighter monetary policy stance adopted by the State bank of Pakistan is doing no service to the trade, industry and economy. The LCCI President said that high markup rate is no more sustainable. It has been causing a great harm to economy and would continue to do so unless and until a realist approach is adopted.
The LCCI President said that despite higher inflation all the major economies have either curtailed or are in the process of reducing high interest rates to protect their economies while countries like Japan, Switzerland and Denmark are maintaining markup rate under zero.
LCCI Senior Vice President Mian Rehman Aziz Chan and Vice President Haris Ateeq said that we have to move forward quickly, as like as other countries of the region, to make the country a hub of manufacturing activities and a heaven for investors. The LCCI office-bearers urged the State Bank of Pakistan to bring down the mark up rate in line with regional economies.
