Lahore Chamber urges SBP to lower banking spread

In a letter to the Governor State Bank of Pakistan Dr Reza Baqir, the LCCI President Mian Tariq Misbah said that the business community appreciates the positive role of the State Bank in recent times to facilitate the businesses affected by COVID-19, particularly through the reduction in the policy rate by 625 bps, one-year extension in principal payment, Rozgar Scheme to prevent layoffs and Temporary Economic Refinance Facility (TERF). He said that these measures have helped to inject liquidity into the economy and helped our businesses to revive their operations.

LCCI head said that the cost of doing business in recent times has escalated significantly due to a hike in the electricity tariff. In this context, it is imperative for us as a nation to make our Energy Mix more efficient and cost-effective by increasing the share of Renewable Energy (Solar, Wind etc.), which currently stands at even less than 5% in our total electricity generation.

The LCCI President asked the government to lower banking spreads to encourage borrowings by the private sector. He said that the decline in banking spread would only be possible if the government stops massively borrowing from banks.

He said that there is a need to focus on the banking sector and to improve access to credit by discouraging preferential treatment. Lowering of banking spreads would help more available to the private sector of the economy and it should be part of the government’s agenda.

Mian Tariq Misbah said that the private sector that is the engine of growth is denied cheaper money while most of the available credit is borrowed by the government to finance its expenses.

There is a need to improve the economic management, he said, adding if the government wants to broaden the tax net it would have to facilitate the private sector by curtailing banking spread and decreasing massive bank borrowings made by it.

The LCCI President hoped that while keeping in view the ground realities, the State Bank of Pakistan would decrease its end-user rate in the SBP Financing Scheme for renewable energy and other sectors by decreasing the bank spread currently ranges from 3% to 4%.