The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) president Mian Anjum Nisar Friday praised the central bank to reduce discount rate by 100 basis points to 7% in an unscheduled meeting of Monetary Policy Committee which has so far dropped the key interest rate by 6.25% from 13.25% since March 17, 2020.

He said the rate slash is a welcome move, but only 100bps (basis points) reduction is not enough. In the prevailing circumstances, interest rate at 7 percent is not feasible for the businesses, he said.

“FPCCI hopes the central bank will consider the plights of the business community and rates would be brought to 5 percent soon,” he added.

He said that the businessmen’s apex body welcomes the central bank’s move to cut the interest rates by 1 percent, urging it to bring discount rate to at least 5 percent in line with the global financial trend.

“This is a commendable step of the State Bank, as it has now started shifting toward supporting trade and industrial growth and employment generation which is not possible without sizeable cut in key policy rate,” he added. He said that the banks should now also be advised to follow the lines of SBP immediately accordingly.

“The banks should be instructed to revise KIBOR on a monthly basis instead of quarterly basis to pass on the benefit of lower rates speedily to the trade and industry, which are struggling to survive, Mian Anjum Nisar suggested and added that the impact on banks on their deposits will be insignificant.

FPCCI President said that the reduction in policy rate by 6.25 percent since March 17, 2020 is commendable step of the government in the present situation that will positively affect cost of doing business and will encourage the investors and industrialists to make new investment in the country. The president FPCCI also said that the pandemic COVID-19 has affected the global economy and pushed to the depression resulting contraction in the economic activities and a threat to unemployment.

He asked the SBP to go the extra mile in these arduous times and leave no stone unturned in providing relief to the financially distressed businesses. This cumulative reduction of more than 6 percent in interest rate in just limited period would cut cost of production, strengthen debt repayment ability and improve the credit worthiness.

He said that as per estimates August inflation numbers will be below 5 percent due to high base effect and depressed demand due to lockdown and other negative effects of COVID-19. Any rise in prices due to supply shocks will not be supported by second wave of inflation, he added.

Moreover, the external risk is managed because of partial foreign debt rescheduling, disbursement of 1.38 billion dollar under RFI and over 70 percent reduction in current account deficit. So, with both demand driven and import based inflation in check there is every reason to gradually bring down the interest rates when the case for immediate relief is apparent.