KARACHI: President of the Karachi Chamber of Commerce and Industry (KCCI), Muhammad Jawed Bilwani, while commenting on the State Bank’s decision to reduce the interest rate by 2 percent, bringing it down to 13 percent, stated that while KCCI and almost the entire business community of Pakistan was demanding minimum reduction of 400 to 500 basis points, the SBP has reduced it meagerly which was disappointing as it did not align with the declining trend in inflation, which fell to 4.9 percent in November.
“With a reduction of 200 basis points, the key policy rate now stands at 13 percent, which remains too high. It is essential for the rate to be reduced more aggressively, ideally to between 5 and 7 percent, in line with many other countries in the region and around the world”, he added while referring to policy rates in India, Vietnam, and Bangladesh where the interest rate stood at 6.5 percent, 4.5 percent and 10 percent respectively.
President Bilwani emphasized that the business community wants to see interest rate dropping to single digit, as this would encourage borrowing and promote business expansion by lowering the cost of doing business, ultimately benefiting the economy. He acknowledged the State Bank of Pakistan for continuing to ease its monetary policy, noting that this was the fifth consecutive cut, reducing the interest rate from 22 percent to 13 percent. However, he urged for a more significant reduction to stimulate economic growth and alleviate the financial burden on businesses and consumers.
He pointed out that the tight monetary policy implemented by the State Bank of Pakistan (SBP) had led to exceptionally high borrowing costs, causing substantial harm to the economy, particularly affecting the manufacturing sector. Therefore, a significant cut has become necessary. “We hope that the declining trend in the interest rate continues, with SBP reducing the policy rate by at least 500 basis points in its next review,” he added.
Bilwani noted that while inflation has decreased to single digit, this was not primarily due to the SBP’s tight monetary policy, but rather due to global declining trend in commodities prices as well as international oil prices along with administrative measures taken by the government and improved agricultural production.
Jawed Bilwani expressed hope for further reductions in the interest rate, which would be welcomed by the entire business community, as they have been adversely affected by the excessively high cost of doing business.
