DEVALUATION ADDS TO MISERY OF COMMON MAN
INTERVIEW WITH MR AZHAR AHMAD BATLA, CEO NN CONSULTANCY
July 16 - 22, 2012
PAGE: TELL ME SOMETHING ABOUT YOURSELF, PLEASE?
AZHAR AHMAD BATLA: I am an entrepreneur who believes in making changes and improvement in quality of life for everyone around.
PAGE: YOUR VIEWS ON LENDING TO THE PRIVATE SECTOR:
AZHAR AHMAD BATLA: Loans enable entrepreneurs like me to take business initiatives. Credit makes economy thrive. Any economy where banks are not available will be victimized by loan sharks and overall economic activity would shrivel. Let me tell you that bankers say that growth in automobile sector has led to increased consumer financing in addition to an increase in personal loans though there is still room for enhancing bank credit flow to consumer sector in housing and household electronics. As we know that the first quarter ended with a net private sector credit retirement of around Rs110 billion. But as the SBP data revealed in April that overall credit flow to the private sector between July 1 and March 23 went up to Rs250 billion (against Rs200 billion in the year-ago period, this means that since the beginning of October till April banks actually lent Rs360 billion to the private sector. Full fiscal year target for private sector lending was Rs200 billion. When the data is announced we would know whether banks easily met the target. I think unlike in previous years the pace of credit retirement this year is markedly slow. Bankers say two things have created room for the banks to increase lending to the private sector. First, public sector enterprises rather retired huge bank credit and second, though the government continues to borrow heavily from banks it schedules the auction of treasury bills and bonds in such a way that genuine demand for private sector credit is met easily. Besides, the central bank often injects liquidity into interbank market ahead of these auctions. It thus makes sure that the government can borrow from banks easily without affecting private sector lending and without giving banks a chance to quote off-market high rates of returns for T-bills and bonds.
PAGE: HOW WOULD YOU COMMENT ON GOVERNMENT'S BORROWING FROM THE BANKING SECTOR INCLUDING THE CENTRAL BANK?
AZHAR AHMAD BATLA: It crowds out private investment. Why would a businessman invest into any business when he can get 12% risk free return from government securities. It needs to stop immediately. Federal government borrowings from commercial banks doubled to Rs691 billion in last fiscal year (up to March 23) from Rs327 billion in the same period of the corresponding year. But provincial governments' borrowing during this period remained marginal-only Rs13 billion. And more importantly, public-sector enterprises retired a huge sum of Rs160 billion of bank credit. (In the same period of last year they had made a net borrowing of Rs30 billion.)
PAGE: COULD YOU COMMENT ON RUPEE DEPRECIATION?
AZHAR AHMAD BATLA: Currency devaluation may help exports but overall makes life for the common man miserable as we have huge dependance on imported oil. Devaluation also happens due to negative perceptions which our media fuels and propagates. As you know that India, Sri Lanka and Bangladesh adjusted their currencies downward against the US dollar which made their exportable products cheaper in the region, so this could be a reason that the State Bank was not coming to the rescue of the rupee. Though the rupee is not pegged to the US dollar and floats independently, the SBP is used to intervene to keep the exchange rate manageable. Some people feel that the rupee was being devalued as a `policy matter`. It is also said the exporters hold the export proceeds for certain period to get maximum benefit of the devaluation. Meanwhile, the exporters have to face new problems on both internal and external front. The serious energy crisis coupled with deteriorating law and order situation in the country and devaluation of regional currencies have made the Pakistani products costlier on the international market. On the other hand, the imports have been increasing abruptly that has already upset the balance of trade.
PAGE: YOUR VIEWS ON FUTURE OF BANKING SECTOR IN PAKISTAN:
AZHAR AHMAD BATLA: Banking is overall very mature in our country but lending rate for small and medium businesses is very high. As you know SME businesses are the major drivers of economic growth. The banking delivery channels have improved and smart automation has helped through internet banking, call centres and mobile commerce.
PAGE : WHAT MUST BE DONE TO IMPROVE THE PERFORMANCE OF PRIVATE SECTOR?
AZHAR AHMAD BATLA: Law and order situation needs to be improved. Very importantly success stories need to be shared and promoted so that negative feelings about our country are mitigated.