LCCI expresses concerns over 2.5pc increase in markup rate

The Lahore Chamber of Commerce and Industry (LCCI) on Friday expressed concerns over 2.5 percent increase in markup rate, saying the move of the State Bank of Pakistan would affect businesses.

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In a statement, LCCI President Mian Nauman Kabir said that a 2.5 percent increase would hit all sectors of the economy hard. He urged the SBP to withdraw a massive hike in markup rates and bring it to a single digit to encourage new investments. He said that increase in markup rate would hinder the process of Industrialization and private sector growth.

Pakistan should bring its markup rate to par with the regional countries, he said.

Mian Nauman Kabir said that the monetary policy of the country should support Industrialization. Unfortunately in the past, the successive governments used the policy of increasing interest rates to control inflation, he said, adding that this policy had failed miserably. Instead of curbing inflation, this policy of increasing the interest rates led to rapid de-Industrialization in the country, resulting in negative GDP growth.

“The markup rate of 12.25% is much higher than other economies in the region (India 4%, Bangladesh 4.75%, China 3.7% and Sri Lanka 5%). It means that access to finance which is imperative for the growth of the industry is already more expensive in Pakistan as compared to other economies in the region. Credit availability to the private sector in Pakistan is currently only 17% of GDP which is also the lowest in the region,” the LCCI president added.

He said that since the government was the biggest borrower, any increase in interest rate also increases the borrowing cost of the country, resulting in a worsening of the fiscal deficit. The fiscal deficit in Pakistan is already in excess of 8% of GDP.

Read more: SBP enhances key policy rate by 2.5% to 12.25%

He said that the high markup rate was one of the biggest reasons for the high input cost of the industrial sector. Resultantly, Pakistani merchandise faces hard competition in the international market.

LCCI senior vice president Mian Rehman Aziz Chan and vice president Haris Ateeq urged the SBP to bring down the markup rate in line with regional economies.