KARACHI:
Industrialists and businessmen have appealed to the State Bank of Pakistan (SBP) to slash its policy rate by 300 to 500 basis points (bps) to provide relief to industries and businesses, which are already reeling from strenuous economic conditions.
Karachi Chamber of Commerce and Industry (KCCI) President Muhammad Jawed Bilwani urged the central bank to push down the policy rate in the upcoming monetary policy committee (MPC) meeting, slated for Monday next week, in response to a notable decrease in inflation to 6.9% in September 2024.
While appreciating the SBP for lowering the rate from 22% to 17.5% in the last three MPC meetings, he mentioned that September marked the second consecutive month of single-digit inflation after over two years of high inflationary pressure.
With inflation now under control and commodity prices stabilising, he said, a significant policy rate reduction of 300 to 500 bps was crucial to ease pressure on businesses and stimulate economic activity. Lower interest rates will invigorate the large-scale manufacturing growth, which has seen consistent declines in recent months. “In October 2021, when inflation was at 9.2%, the policy rate stood at 7.2%. In 2024, inflation has decreased even further, therefore, the Karachi Chamber’s call for a significant cut in interest rate is justified,” Bilwani remarked.
He pointed out that the Large-Scale Manufacturing Index plummeted 19.2% during July 2024 compared to January 2024, underscoring the challenges faced by the private sector due to a high interest rate, reduced access to credit and the excessive collateral requirement.
According to the World Bank, collateral for loans in Pakistan averages 153% of the loan value, often surpassing the amount borrowed and further limiting private sector financing.
Echoing similar remarks, Korangi Association of Trade and Industry’s former president Farazur Rehman expressed concern over the government’s commitment to the International Monetary Fund (IMF) to raise the policy rate if inflationary pressures arose or external factors threatened the country’s financial stability.
Citing the IMF’s latest report, he said the lender advised the government to be cautious about lowering the policy rate until there was clear evidence that core inflation was slowing down.
