Interest rate cut hailed but insufficient to spur growth Private sector losing interest in Bank loans .

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(14th September 2015)

The recent interest rate cut by the central bank is not enough to stimulate growth as government would need policy interventions to change the gloomy economic situation, a business leader said Monday.

Reduction in the interest rates can contract inflation which will go up again as gas and power tariff would be increased if rupee is devalued, said President Pakistan Businessmen and Intellectuals Forum (PBIF) and former provincial minister Mian Zahid Hussain.

Speaking to the business community, he said that interest rate is not a magic want to resolve all issues which require careful assessment of the situation of proper steps.

He said that SBP has anticipated good income through Euro and Sukuk bonds, IMF loan and government receipts but not shed enough light on subsided exports, reduced tax collection, unsatisfactory investment climate and plight of large scale manufacturing sector.

Mian Zahid Hussain said that the bank linked improved exports to situation in US and EU while ignoring to clearly mention the problems and their reasons at home.

Moreover, the policy review hoped that manufacturing will pick up due to improved energy supplies but the reason for the improvement in energy situation was not divulged.

The reduced policy rates were also termed beneficial for productive sector which would be able to secure more loans from commercial banks, however, the ground reality is otherwise.

Banks continue to ignore private sector including SMEs and their advances are falling steadily since November last year despite a reduction of 3.5 percent in the interest.

In fact the private sector was getting more loans when interest rate was in double digit before the record fall in the global oil prices. The cut will only help government which will get cheap loans.

The economy need solid steps as hopes and prayers will not resolve pressing economic problems.

 

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