Pakistan Hosiery Manufacturers and Exporters Association (PHMA), while condemning the central bank to increase the rate of financing under Export Finance Scheme (EFS) to 7.5%, suggested it to delink the rates of EFS and LTFF with SBP Policy Rate to facilitate the value-added textile exporters.

PHMA Central Chiarman Shahzad Azam Khan, in a statement issue here on Friday, said that the following the monetary policy announcement, the SBP had also raised the markup rate for EFS as well, enhancing it from 5.5% per annum to 7.5% with effect from May 24, 2022. Furthermore, the markup rate for financing under Long Term Financing Facility (LTFF) was also increased from 5% to 7% per annum, as these rates have been linked now with SBP Policy Rate through a formula so that any change in policy rate could automatically be reflected in rates of these refinance schemes, read the SBP circular.

It is to be noted that the State Bank of Pakistan in its last monetary policy statement had announced increase in the markup rate for financing under Export Finance Scheme (EFS) by 2.5 percent to 5.5%. Accordingly, the markup for Export Finance Scheme (both Part I and Part II) were fixed at 5.5 percent with effect from April 8, 2022.

Shahzad Azam Khan said that Pakistan should take advantage of those export orders, which were cancelled by other regional countries, he suggested and added that for this, the government will have to reduce the production cost of the industries to avail this offer by the international buyers.

PHMA Central Chairman stressed the need for reduction in discount rate, arguing that low key policy rate is essential to make the Pakistani exports sector competitive. He said that the achievements in exports and stabilization of the economy through the monetary policy measures now required to be sustained again by extending reduction in the policy rates so that the debt liability of the business sector is compensated through lower markup rate.

Demanding competitive interest rates at regional countries’ level, he said that the SBP’s stance of jumping the monetary policy rate by 1.5 percent is not right because it was already high compared with the markup rate of China, India and Bangladesh.

PHMA senior vice chairman Abdul Hameed said that most economic activity data and indicators of consumer and business sentiments have shown continued improvement. The export industry needs continued support from the government in the form of lower interest rates, amid such external shocks, he suggested.

He also demanded the immediate reduction in the electricity tariff, especially for the Small and Medium Enterprises (SMEs) as a first step towards a cut in the production cost, while the second and vital step towards this direction would be bringing discount rate to the regional level with a view to provide level-playing field, especially to the value-added textile export industry.

Appreciating the central bank’s previous role in sustaining economic growth through supporting trade and industry in past, he said, the reduction in interest rate would be a vital relief to the business community.

He said the central bank should announce an initiative related to loans for the Small and Medium Enterprises (SMEs), as the sector has to show collateral to banks, which are always reluctant to offer them concessional credit.