FPCCI concerned over SBP monetary policy statement.

KARACHI , September 30, 2009 (Balochistan Times): Sultan Ahmad Chawla, President, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has expressed his serious concern over monetary policy statement of Governor State Bank of Pakistan. In a press statement issued here on Wednesday, FPCCI Chief said State Bank has issued only statement to continue the present monetary policy. In fact this was mere information not a policy statement. Business community has been expecting the significant reduction in the interest rate as it is a consensus recommendation by the economists that monetary policy should be eased to control the adverse effects of the recession. Sultan Ahmed Chawla has also pointed to the joint recommendations of Confederation of Asia Pacific Chambers of Commerce and Industry (CACCI). It was recommended in the G-20 Summit of CACCI in Pittsburgh that to reduce the adverse effects of recession on trade and production activities monetary authorities should ease the monetary policies by reduction of interest rates, enhancing trade financing facilities and other expansionary measures. It is notable that presently interest rate in Pakistan is the highest in the world. Currently market interest rate in India is 3%, in USA 0.2%, in U.K. 0.6%, in Japan 0.4% and it is 13% in Pakistan. Banking spread in Pakistan is 7.35% which is the highest in the world and in this state of economy industry can not survive and to compete in the international market is absolutely impossible. Sultan A. Chawla has shown disappointment on the structure of newly formed Monetary Policy Committee. The industry is the largest participant in the bank deposits and financing activities has no representation in the newly formed committee. Industry is the largest and most important stakeholder which bridge the connection between monetary policy and economic development, however, this important segment has been ignored completely in the monetary policy formation. He demanded that 50 percent of the members of the monetary policy formation committee should be taken from the private sector through nomination by the industry representatives. Dr. Mirza Ikhtiar Baig Chairman Standing Committee on Banking, Credit and Finance of FPCCI said Wednesday that the business community was disappointment on State Banks decision for not reducing the discount rate. In a statement, Dr Baig said that all indicators such as decline in M-2 money supply growth, reduction in inflation, less credit demand and KIBOR trading less than SBP policy rate, were supportive of reduction in mark-up rates. He said that SBP has opted an extreme cautious approach anticipating any upward rebounce in inflation due to increase in power prices etc. Dr Baig has stressed the need to bring single digit inflation and single digit mark-up by the end of this year to get the true benefits of the Textile Policy for the revival of textile industry as well as other industrial sectors for much needed industrial and economic growth to enhance our exports and to provide new job opportunities in the country.

(THROUGH ASIA PULSE)