KARACHI: Karachi Chamber of Commerce and Industry (KCCI) Banking and Insurance Advisor Ateeq Ur Rehman has said that the highest cost of doing business coupled with high inflation rate suppresses the purchasing power of the potential customers, however, the reduction in the interest rate shall ease the economic activity to forward the step toward progressive growth.
He said that in forthcoming monetary policy, to be announced on January 15, the SBP is requested to cut down the interest rate to single digit that is at least by 2.5% thus bringing it to 7 per cent. If the policy rate remains at 9.5%, the cost of doing business will continue to increase and there are major chances of default by businessmen, making it difficult for businesses to clear their liabilities.
Ateeq further said that the high rate of doing business continuously impacts the profitability of the small and medium sized companies which even results in equity erosion. Furthermore like in past, net borrowing by the private sectors from the banks is negligible.
He stated that on the top of it, there is no incentive for easy term SME financing, adding, reduction in interest rate will be a great incentive for the economic uplift of Pakistan through SME sector. There is a great need of encouragement of “asset based financing” through “leasing sector in Pakistan”. The leasing sector has been an essential arm for the development of progressive growth of the country. Interest rate at such high levels is a main concern and shall greatly affect the leasing company’s equity, recovery and booking of profit as compared to the losses.
KCCI adviser said that the easy financing of solar panels should be allowed with special incentive of lower interest rates, as a reward for helping the country reducing the energy burden on utilities and national grid. Banks should not allow frequent lending to the government as it will create space for business to borrow, as private sector financing is almost nil, he added.