KARACHI: Business leaders expressed disappointment with the State Bank of Pakistan’s (SBP) decision to reduce the interest rate by only 100 basis points on Monday. They had anticipated a more substantial cut of 300-500 basis points to boost economic activity.
Abdul Aleem, Secretary General and CEO of the Overseas Investors Chambers of Commerce and Industry (OICCI), acknowledged the positive nature of the rate cut but indicated it fell short of expectations, given the recent low inflation figures. He emphasized the need for a more significant reduction to stimulate private sector borrowing and economic growth.
Ehsan Malik, CEO of the Pakistan Business Council (PBC), described the 100 basis point reduction as a cautious measure due to uncertainties surrounding inflation impacts from recent budgetary decisions. Malik suggested that a larger rate cut was necessary to counterbalance the effects of increased power tariffs, higher petroleum levies, and other fiscal measures. He recommended reducing taxes on power tariffs to manage inflation and lower the policy rate more rapidly.
Iftikhar Ahmed Sheikh, President of the Karachi Chamber of Commerce and Industry (KCCI), argued that the interest rate should have been reduced to 8% to align with regional standards. He stated that a single-digit rate would lower borrowing costs, stimulate economic activity, and alleviate financial pressures on businesses and consumers. Sheikh criticized the current high borrowing costs for suppressing the manufacturing sector.
Mohammad Kamran Arbi, Chairman of the Site Association of Industry (SAI), echoed the call for a single-digit interest rate in the next monetary policy review. He noted that government borrowing currently dominates 80% of total borrowing, leaving only 20% for the private sector. Arbi suggested that adopting a similar approach to global trends, with lower interest rates boosting private sector borrowing, could benefit Pakistan’s economic environment.
