All Pakistan Textile Mills Association (APTMA) has urged the State Bank of Pakistan (SBP) to further slash the interest rate by 2 percent to bring it at par with inflation.
Appreciating SBP’s policy in dealing with the economic impact of Covid-19, the Association has said SBP has in very quick time announced two concessionary finance schemes ;(i) temporary economic relief facility (modified to include expansion or acquisition) and ;(ii) refinance scheme for payment of wages and salaries to the workers and employees of business concerns.
SBP also allowed rescheduling of principal by deferring installments by one year and reduced interest rate from 13.25 percent to 9 percent.
However, some of the things that SBP can further do to strengthen support of the economy and industry are; (i) SBP Monetary Policy Board scheduled for 15th May 2020 should reduce the interest rate by 200 bps to 7 percent in line with inflation and interest rates in competing countries;(ii) concessional refinance currently is only available to industry beyond weaving thereby excluding cotton, spinning and weaving which require heavier investment in inventory
In order to sustain industry, entire value chain should be eligible for concessional finance. Interest may be deferred on both short-term and long-term financing. The Industrial sector could not benefit from reduction in interest rates as it was announced in first week of April whereas the quarterly interest rates got locked in at 12.5 percent ++ ;(iii) in line with the principal deferment, Interest for quarters up to 31st March and 30th June should be deferred for a period of 12 months as the sector has suffered serious cash flow and profitability issues due to Covid-19 as export orders cancelled, payments due against LCs delayed, fresh orders not forthcoming and domestic demand also crashed due to lockdown.
“We strongly urge the State Bank of Pakistan to implement these further measures to enable industry to sustain employment and maintain exports, stated the Association in a statement.