KARACHI: The industries in the Uthal area of Balochistan are facing immense problems due to high cost of doing business, which has severely hit their productivity in the last two and a half years.
Uthal is located 50kms away from the Hub Industrial Estate, which houses various industries. These industries have been providing jobs to residents for the last few decades.
The industrialists in the area seek immediate remedial measures, as they are passing through the most crucial times because of rising inflation, which has jacked up the prices of inputs as well as the cost of borrowing, hitting the working capital requirements hard.
The raise in POL, gas, and electricity tariffs is increasing the financial burden of households and industry. The cost of doing business and cost of production is rising on a daily basis, they said.
Manzoor Hussain, an industrialist, pointed out that the cost of financing was huge because of high interest rate.
Talking to Media, he expressed disappointment with the State Bank of Pakistan’s recent decision to reduce the interest rate by 100 basis points and set it at 19.5 percent. He termed the cut insufficient, arguing that the business community had long called for a substantial reduction.
He pointed out that Pakistan’s high interest rates had contributed to inflation, capital shortages for industrialists, and inability of businesses to afford expensive bank loans.
“The SME sector and other industries cannot sustain such high interest rates. Significant reduction is necessary to foster industrial growth and create employment opportunities,” he noted.
Manzoor said even when inflation was at 11 percent in May, the interest rate remained unchanged, leading to a further increase of over 12 percent in inflation. He emphasized that high interest rates had slowed the economic growth.
“Substantial reduction in policy rate would enhance economic growth and industrialization. The current rate of 19.5 percent is simply too high for businesses to thrive,” he said.
Manzoor cautioned that high interest rate could lead to a severe economic crisis. The industries are facing capital shortages and cannot afford to operate under such conditions. This could result in industrial closures and increased unemployment, he said.
He demanded immediate reduction in interest rates to prevent further industrial closures and avert a deepening economic crisis.
Bilal Memon, another industrialist in Uthal industrial area, told Media that the State Bank’s tight monetary policy had caused too much loss to the economy, particularly the cost of doing business, which grossly suppressed the manufacturing sector, so relief in the form of substantial cut had become inevitable.
Although inflation has drastically come down, it is not because of the SBP’s tight monetary policy stance but due to the administrative measures taken by the government along with improved agricultural production, he opined while referring to the enhanced agricultural production.
“Stability in rupee value is also one of the major reasons for easing inflation, as it is a well-known fact that huge quantities of commodities are regularly being imported. Therefore, devaluation of rupee directly triggers inflation,” he added. –INP
