SMEs cut back on capital expenditure as interest rates rise

HIGHER domestic interest rates may not have hit Singapore’s small and medium-sized enterprises (SMEs) that hard yet, thanks to pandemic-era loan schemes – but amid a global rising rate environment, some are cutting back on capital expenditure to avoid taking on fresh loans.

As central banks around the world tighten policy, rates here have risen sharply since the start of the year, with the 3-month compounded Singapore Overnight Rate Average (Sora) at 1.2 per cent as at Jul 27, up from 0.19 per cent on Jan 4.

Borrowing costs this month are up 5 per cent year on year for Kok Tong Transport & Engineering Works, said Liaw Chun Huan, chief financial officer of KTC Group, which oversees the construction machinery leasing company.