LAHORE:
The Pakistan Hosiery Manufacturers and Exporters Association (PHMA) has criticised the decision of the State Bank of Pakistan (SBP) to maintain its key policy rate at 11%, calling it a major blow to industrial recovery, export growth and job creation efforts.
In a statement on Thursday, PHMA Zonal Chairman Abdul Hameed said that value-added textile export sectors were expecting a long-awaited reduction in interest rate to single digits in light of falling inflation and improved economic indicators, but the SBP’s decision deeply disappointed the industry, which was already reeling from high production costs and declining global competitiveness.
Abdul Hameed pointed out that continuation of such a high policy rate had no justification when headline inflation had dropped to around 4% and core inflation was showing clear signs of moderation. “Based on the current inflation rate, the policy rate should not be more than 6% and keeping at nearly double that level is stifling industrial potential.”
He said that the central bank’s refusal to bring down interest rate despite macroeconomic stability and declining price pressures was blocking the path to growth as borrowing costs were simply unaffordable for small and medium-sized exporters.
High interest rates are choking liquidity, preventing capital investment, discouraging new orders and making Pakistani products more expensive in international markets.
Citing an example, Abdul Hameed said that neighbouring countries had already adopted a more pro-growth monetary stance as policy rates in India, Bangladesh, China and Thailand stood well below that in Pakistan.