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Interest rates and economic paralysis? Here is a lesson for Pakistan from South Korea

Seoul has prepared a $56.97bn programme to boost investment and support small businesses

SEOUL (Web Desk) – Businesses cannot sustain amid high borrowing costs. Forget about expansion and setting up new ones. Result? Stagnant wages and absence of employment generation as well as rightsizing, which directly affects the entire population. The same is being witnessed in Pakistan.

How to tackle the challenge? Government support to businesses for fuelling economic activity. But there is no such thing happening in Pakistan, as we are only getting energy tariff hikes and rising fuel prices which further dampen business morale, increase cost of doing business and reduce domestic demand.

Read more: No more dreams as rich-poor divide widening at frightening pace

On the other hand, Reuters says South Korea has prepared a financial support programme of 75.9 trillion won ($56.97 billion) for companies increasing investment in key sectors as well as small businesses struggling with the impact of high interest rates.

The programme includes 15 trillion wons worth of cheap policy loans from a state-run bank for key industries, such as semiconductor and battery, while commercial banks will also provide 20 trillion won to support small and medium-sized businesses, the Financial Services Commission said in a statement on Thursday.

"Our banks need to start making efforts to expand support for companies, beyond consumer financing focused on mortgage loans," said Chairman Kim Joo-hyun.

Evolving trade relations with China, technological advancement in major industries and fragmentation of global supply chains pose new challenges to companies, raising the need for regulatory reform and financial support, Kim said.

For companies facing liquidity trouble this year due to high interest rates, banks will offer a temporary interest rate cuts, the commission said.  

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