High markup rate influencing cost of products: LCCI

Strong economic framework and harmonization between the institutions and private sector can produce a momentum for a strong economy.
In a statement, LCCI President Irfan Iqbal Sheikh and Senior Vice President Ali Hussam Asghar said that trade and industry related institutions should understand the logical needs of private sector and help government to ensure an atmosphere conducive for business community.
They pinpointed the recent move of the State Bank of Pakistan by freezing markup rate at 13.25 per cent saying that lower markup rates make it cheaper to borrow for the business community. Markup rates should be brought down to a single digit that would encourage the industries to take out loans to expand their operations.
They said that high cost of borrowing was discouraging the demand of credit by the private sector and slowing down the economic activities.
They said that reduction in markup rate from existing 13.25% to single digit would be a great favour to the industrial sector.
It would help the government to attain the target of industrial growth, would reduce the cost of production and would also bring capital of the banks into circulation.
“Markup rate influences the cost of product.
Pakistani products cannot compete in the international market to those countries which were offering capital to their industries on zero or less than one percent markup rates”, the LCCI office-bearers added. They said that policy rate increased to 13.25 in July 2019 as compared to 6.5% in May 2018. Sharp increase in interest rate pushed up borrowing cost that retarded investment, capacity generation and hence exports.
They said that tight monetary policy stance had always proved a big blow to the industrial sector. “We have to move forward quickly, as like as other countries of the region, to make the country a hub of manufacturing activities and a heaven for investors”, they added.
They urged the State Bank of Pakistan to announce at least 400 basic points cut in markup rates in the upcoming monetary policy.