The Chairman of the FPCCI Advisory Board and National Business Group Pakistan, the President of the Pakistan Businessmen and Intellectuals Forum and All Karachi Industrial Alliance, and former provincial minister Mian Zahid Hussain said on Wednesday that banks profit from high interest rates while companies and the masses suffer. He said economic recovery requires a significant interest rate drop, which policymakers should consider seriously.
Mian Zahid Hussain said that economic stagnation would continue with present interest rates, disappointing the business community and damaging the fragile economy.
Talking to the business community, the veteran business leader said that banks are taking advantage of high interest rates while the business community feels the pinch. He added that a significant reduction in interest rates is needed to revive business activities. This will increase productivity, reduce unemployment, and boost exports. He said that economic stagnation would not end without reducing the interest rate, while its reduction would relieve distressed people.
Mian Zahid Hussain said that the economy cannot be run only for the profit of commercial banks. He demanded that if the government and central bank claim that inflation has been reduced and improved economic indicators are valid, its benefits should also reach the people.
Mian Zahid Hussain said that the central bank should meet the expectations of the business community so that they can play their role in the economy. The interest rate is currently 17.5%, which is very high despite the recent reduction. The state bank wants to cut interest rates gradually rather than sharply so that neither inflation nor imports increase, which could weaken the rupee.
The business leader said that the business community needs more capital, which has made paying employees on time a big problem. At the same time, the increase in production costs has also become unbearable, which has affected their ability to compete.
If inflation has come down, the government and the central bank should relax some policies to revive the industry. Mian Zahid Hussain said that inflation was in the single digits in October 2021 while the interest rate was 7.25 percent. Therefore, if inflation returns to a single digit again, as claimed, interest rates should be reduced.
An immediate reduction in the interest rate to at least 3% is necessary at this time to prevent an excessive reduction in imports, which is also affecting exports. That is why the FBR has also failed to achieve its target, which will result in a mini-budget any time soon.
Mian Zahid Hussain further said that many industries and other businesses have closed due to a lack of capital. At the same time, investment and employment have decreased, and the financial burden on the people has increased dramatically. There is a need to overcome the current frustration in the industrial and business circles so that they can play their role in economic development.
