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The textile industry on Wednesday called for regionally competitive interest rates, urging the State Bank of Pakistan, which is announcing its key policy rate on Friday, to bring discount rate down to 8 per cent to counter weak growth and revive fresh, private investment in the economy to create jobs.
The manufacturers argued that only textile sector has borrowed more than Rs41 billion from banking sector to make investment, acquiring latest machinery for the growth of industry during last six months due to hefty cut of 3 per cent in policy rate from 13.5 per cent to 9.5 per cent in last one year. They said that the current discount rate at 9.5 per cent is still very high and discouraging investment, up-gradation and product diversification plans.
They said that the interest rate should not be higher than 8 per cent for the sake of expansion in investment activities and for creating jobs for the millions of young people entering the job market every year. They said that availability of money is absolutely necessary for bringing down the cost of production as it is like any other industrial input. If its price is raised, the cost of production also goes up. They said that Pakistani goods had already lost their due place in the global market for being uncompetitive.
APTMA Chairman Aptma Ahsan Bashir said that the reduction in mark up had a positive impact on the non performing loans as well. He said that the NPLs of the textile sector were rapidly rising since 2008 but ever since the central bank started easing the interest rates the growth in NPLs has stopped.
The industry representative said that high interest rate also keeps the manufacturers from investing money in capacity expansion, in technological up-gradation and product diversification therefore the SBP should bring it down so that the target set in the recently announced three-year Strategic Trade Policy Framework could be achieved.
Group leader Gohar Ejaz said that the availability of liquidity to the business community is need of the hour as the SBP tight monetary policy in the name of financial discipline had already caused irreparable dent to the private sector growth and brought in an unusual surge in unemployment. He said that neither any industrial expansion took place nor any investor put money in any new business venture. And one of the reasons was expensive credit cost to the private sector, keeping the industrialists on sidelines.
He said that rate of interest in regional countries like Bangladesh, India and Sri Lanka is in the vicinity of 7 per cent. He said that investment in technology is still much below desired level” he said adding that Pakistan need to upgrade its textile sector rapidly to catch up with its regional competitors that invested heavily in textiles during the last five years.