SBP’s wel­come move to boost econ­omy

Pakistan Observer - - EDITORIALS & COMMENTS -

ON the back of im­prov­ing eco­nomic in­di­ca­tors, the State Bank of Pak­istan has slashed in­ter­est rate to his­toric 5.75 per­cent from 6 per­cent — a pos­i­tive ini­tia­tive to fur­ther re­duce the cost of do­ing busi­ness and en­cour­age en­trepreneurs to in­vest in dif­fer­ent lu­cra­tive fields. The de­ci­sion has been taken as busi­ness­men and in­dus­try cir­cles were strongly plead­ing for a growth based mon­e­tary pol­icy.

The pol­icy rate was pre­vi­ously cut by 50 ba­sis points to 6 per­cent in Septem­ber 2015 and since then the cen­tral bank had been main­tain­ing it. The re­cent re­duc­tion would be ben­e­fi­cial as it would fur­ther cut the in­put cost for busi­nesses, fa­cil­i­tate easy credit avail­abil­ity to the pri­vate sec­tor and en­cour­age new in­vest­ments. The large scale man­u­fac­tur­ing sec­tor, which has wit­nessed a sig­nif­i­cant growth over the last three years, is ex­pected to ben­e­fit the most from this de­ci­sion due to low prices of raw ma­te­rial. This comes as Fi­nance Min­is­ter Ishaq Dar while ad­dress­ing a pre-bud­get sem­i­nar on Satur­day also gave glad tid­ings about the fu­ture eco­nomic prospects say­ing the econ­omy will re­main ro­bust in the com­ing years while at the same time he an­nounced the good news that no new tax would be im­posed in the next bud­get. This, in­deed, should give con­fi­dence to the busi­ness com­mu­nity and en­cour­age them to in­vest in dif­fer­ent sec­tors of econ­omy ul­ti­mately lead­ing to cre­ation of many job op­por­tu­ni­ties for the youth. To get de­sired pos­i­tive re­sults of low­er­ing the in­ter­est rate we sug­gest that govern­ment avoid bor­row­ing from com­mer­cial banks for deficit fi­nanc­ing oth­er­wise re­sources from com­mer­cial banks may be shifted to public sec­tor in­stead of pri­vate sec­tor, which could dam­age in­dus­tri­al­i­sa­tion. Sim­i­larly, the flow of lend­ing should en­cour­age small-medium en­ter­prises as it would not only al­le­vi­ate poverty but also help the govern­ment to achieve goal of seven per­cent growth rate in the next two to three years.

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