Experts warn further rate cuts may hurt vulnerable segments of society

Economic experts have cautioned that any further reduction in Pakistan’s key interest rate, currently at 12%, could disproportionately impact vulnerable segments of society, including pensioners, life insurance policyholders, widows, and low-income adults. 

They argued that such a move would erode savings, reduce policy profits, and further widen socio-economic disparities.

According to a report published by The Express Tribune, analysts noted that while the domestic banking sector profited heavily from investing in high-yielding government Treasury Bills during the period of tight monetary policy—when interest rates stood at 22%—the transition to a lower rate regime has not brought comparable benefits to the broader population. 

Instead, it has adversely affected the so-called “silver economy,” leaving retirees and fixed-income groups financially marginalized.

They urged the government and the State Bank of Pakistan (SBP) to develop a protective and inclusive interest rate framework through a consultative process. 

Suggested models include adaptations from the United States’ usury laws, the European Central Bank’s anti-negative interest rate policy, India’s social priority approach, and Scandinavia’s system of special interest rates with upper caps.

The experts recommended a broader financial consensus involving all stakeholders and proposed tax incentives or preferential energy pricing for businesses as alternatives to across-the-board rate cuts. 

They also called for policies aimed at democratizing wealth, productive assets, and financial access to prevent further economic marginalisation.