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Economy showing no signs of recovery despite recent cut in policy rate by State Bank

Islamabad, August 31, 2012 (PPI-OT): The Pakistan Economy Watch (PEW) on Friday said economy is showing no signs of recovery despite recent cut in policy rate by the State Bank.

Reduction in the interest rates have not motivated commercial banks to start lending to the private sector as they still prefer to advance loans to the government, it said.

The cost of credit is still considered high in business community which barring economic revival since years, said Dr. Murtaza Mughal, President PEW.

Other reasons behind frustration in the private sector include energy shortages, political uncertainty, inflation and deteriorating security conditions.

Banks seems unwilling to focus on the private sector which calls for out of the box solutions like a new plan to support private sector for expansion, capacity building, modernisation and up-gradation to capture export markets, he added.

Dr. Murtaza Mughal said that government can consider establishing a fund to support investment needs of the productive sector so that our exports remain competitive in the international market.

Presently the industrialists who want to expand or upgrade their units find it difficult due to unbearable cost of credit; an issue which must be realised at the highest level, he added.

He said that there are many sectors which despite resources haven’t invested in up-gradation or expansion since years for want of enabling policies.

Government can also consider easing borrowing rules for industry to spur growth; he said adding that overseas borrowings can be made easy be relaxing requirement for some of the critical industries.

Pakistan need new measures to support private sector, boost foreign and domestic investment and upgrade the country’s infrastructure which is hurting annual economic growth.

Sharply slowing economy with growth slumped to its weakest calls for revolutionary steps otherwise inflation, wide fiscal and current account deficits, weakening exports, and flight of capital will continue to contribute towards downturn, warned Dr. Mughal.

He said that previous measures haven’t had a significant impact, now some positive steps indicating government’s seriousness in resolving the issues of economy will help it is the election year beyond imagination.

For more information, contact:
Dr. Murtaza Mughal
Pakistan Economy Watch
402, 4th Floor, Gulistan Khan House, Fazal-e-Haq Road,
82-East, Blue Area, Islamabad
Tel: +9251 251 0375
Fax: +9251 280 2449
Cell: +92321 515 7671

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