Islamabad: Islamabad Chamber of Commerce & Industry has called upon the government to focus on taking measures for availability of easy credit facility to private sector that would promote investment new businesses, encourage industrial projects and allow businessmen to expand their business operations.
Shaban Khalid, President, Islamabad Chamber of Commerce & Industry said that private sector is the engine of growth for economy, but government heavy borrowing from banking sector is depriving it of affordable credit availability for investment and business development.
The government has reportedly borrowed an amount of Rs.980 billion in the first quarter of current fiscal year, which shows its inefficient economic management. Instead of focusing on improving tax mobilization and taking other revenue generating measures, government has opted to excessive bank borrowing to cope with rising fiscal deficit, which is highly inflationary in nature and retards the growth of economy.
Shaban Khalid said due to high lending rates for public borrowing, banks shy away from lending to private sector and prefer to invest in government treasury bills and investment bonds.
But this approach negates the intermediary role of banks whose main function is to promote savings and channel them to productive private-sector trade and investment activities. Due to this situation, private sector in Pakistan finds itself in tough competition with the government in obtaining loans from banks.
He said according to a World Bank report, credit to private sector in Pakistan has been on a declining trend as it declined from 23.6% of GDP in 2009 to 16.4% in 2012 while during the same period it improved from 47.7% of GDP to 51.5% in India, 41.5% to 49.6% in Bangladesh and 127.2% to 131.6% in China.
It shows that our neighbours are focusing on private sector for achieving better economic growth, but our private sector is facing even more challenges on top of the energy crisis and law & order situation.
Shaban Khalid stressed that government should reverse the current strategy of heavy bank borrowing and direct banks to focus on private sector for providing it easy credit facility. Such a shift in strategy will improve the confidence of investors and enable the private sector to spend more on new investment and business development leading to growth of business activities, creation of new jobs and revival of overall economy.