Industrialists and traders have voiced disappointment over the State Bank of Pakistan’s (SBP) recent decision to cut the policy interest rate by just 1%, urging the central bank to adopt more aggressive measures to support economic growth, exports, and job creation.
Business leaders emphasised the need for a comprehensive monetary policy aligned with national objectives, particularly to aid small and medium-sized enterprises (SMEs), which are the backbone of the economy.
United Business Group (UBG) Patron-in-Chief S M Tanveer criticised the SBP’s conservative approach, stating that a reduction of at least 200 basis points was expected. He underscored the importance of reactivating the construction sector, which impacts 72 allied industries, and resolving issues with independent power producers (IPPs) to ensure a stable power supply.
Tanveer also stressed the need for a robust fiscal policy focused on economic growth, including early initiatives to promote local cotton cultivation and reduce edible oil imports.
Karachi Chamber of Commerce and Industry (KCCI) President Muhammad Jawed Bilwani criticised the nominal rate cut, citing the financial strain on businesses due to rising input costs, volatile exchange rates, and high energy prices. He noted that inflation had eased significantly, with consumer price inflation dropping to 4.1% in December 2024, its lowest level in six years, creating ample room for a more substantial rate cut.
Federal B Area Association of Trade and Industry (FBATI) President Shaikh Muhammad Tahseen echoed these sentiments, calling for a reduction to single-digit interest rates to encourage borrowing and investment. He highlighted the challenges faced by SMEs, which require affordable financing to revive production and expand operations. Tahseen urged the government and SBP to develop SME-specific loan schemes with reduced markup rates to stimulate growth.
SITE Association of Industry (SAI) Karachi President Ahmed Azeem Alvi expressed frustration with conflicting signals from the government. While Prime Minister Shehbaz Sharif launched the “Uraan Pakistan” initiative to boost economic growth, Alvi said, the bureaucracy raised gas tariffs, and the central bank hesitated to reduce interest rates further. He argued that high borrowing costs were undermining investor confidence and slowing economic recovery.
Pakistan Chemicals & Dyes Merchants Association (PCDMA) Chairman Salim Valimuhammad also dismissed the 1% cut as inadequate, urging bolder action to address economic challenges. Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh demanded an immediate reduction of 500 basis points to align monetary policy with the Special Investment Facilitation Council’s (SIFC) vision for economic and export growth.
Meanwhile, the Lahore Chamber of Commerce and Industry (LCCI) welcomed the rate cut but stressed the need for additional measures, including tax reforms, lower energy costs, and targeted support for SMEs. LCCI leaders called on commercial banks to pass on the benefits of lower rates to businesses, particularly startups and small enterprises, which drive economic activity.
Business leaders agreed that a substantial rate cut would boost economic activity, strengthen investor confidence, and demonstrate the government’s commitment to supporting growth and stability. They urged the SBP to take bold steps in its next monetary policy review to align interest rates with regional benchmarks and address the pressing concerns of Pakistan’s business community.
