Karachi : The news item, “Central Bank is widely expected to cut its key interest rate next week by 100/ 200 bps after holding it at a record 22 percent for seven straight policy meetings”. The Business Community is expecting 400 to 500 bps cut reason being, the huge borrowing cost which always reflects the increase in expenditure after markup payments said ateeq ur rehman (economic & financial analyst).
We are a debt oriented country and facing acute economic challenges due to paucity of resources and financial losses. In order to cover financial losses, government borrows heavily from local banks, international / multilateral / bilateral donors on heavy interest rates thus increasing the size of actual loan. For the fiscal year 2024 -25, our external financing requirement is like $21 to $23 billion consequently will have detrimental impacts of enormous interest rates.
Simultaneously, the industrialist and manufacturers when borrows from the lenders, also faces the devastating situation of paying massive markup with actual. Subsequently the cost of doing business and cost of production further becomes more difficult and expensive. The common man is ultimately remains the sufferer said ateeq.
Moreover, SMEs does not have sufficient resources and normally work on marginal profit therefore when they are forced to borrow, they remains to be prey of huge utility tariffs and big interest rates. For a fact , Industries in general and industries of the SME sector in particular are on the verge of collapse due to difficult access to finance after sustaining financial losses, etc because of unbearable markups.
Anything or everything related to foreign direct investment should be the top priority instead of relying on loans / grants to keep the wheel moving, therefore the debt is unsustainable and also the big interest rates.
Ateeq added that if we have to seriously pull out the country from current malice, radical decisions have to be made of reduction in interest rates and cut in electricity and gas tariffs.
