Business Leaders Urge Deeper Rate Cuts to Drive Economic Growth

The recent 2.5% cut in the State Bank of Pakistan’s (SBP) policy rate has prompted a mixed response from the business leaders, calling for further reductions to drive economic growth. Industry stakeholders argue that the current rate remains high and limits the potential for business expansion, urging the SBP to aim for a single-digit interest rate to better support the business sector.

FPCCI Calls for More Substantial Reductions

Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), expressed disappointment, noting that business leaders had anticipated a more significant cut. He explained that with inflation reported at 7.2%, a single-digit rate would be more effective in boosting growth. “The business community expected a 500-basis-point cut to bring the rate down to 12%, but the SBP only reduced it by 250 basis points,” Sheikh said, emphasizing the need for a policy rate that aligns with current economic conditions.

KCCI Highlights Impact on Borrowing and Business Expansion

Muhammad Jawed Bilwani, President of the Karachi Chamber of Commerce and Industry (KCCI), also commented on the rate cut, acknowledging the SBP’s continued policy easing but pressing for a larger reduction. According to Bilwani, the policy rate should ideally be between 5% and 7% to encourage borrowing and stimulate business growth. He added that high borrowing costs continue to impact the manufacturing sector, and reducing the rate would support the industry in boosting economic activity and creating jobs.

KATI Stresses Long-Term Economic Strategy

Junaid Naqi, President of the Korangi Association of Trade and Industry (KATI), described the rate cut as a positive move but urged the SBP to consider deeper reductions. High-interest rates, he noted, have slowed economic activity and restricted investment. Naqi argued that a reduced rate would not only support industrial expansion but also strengthen the currency, calling for balanced government policies to manage imports and protect the rupee’s value.

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SITE Association Pushes for More Frequent Policy Reviews

Ahmed Azeem Alvi, President of the Site Association of Industry, criticized the recent reduction as insufficient, suggesting that the SBP consider more frequent policy reviews. Alvi argued for a single-digit interest rate to bolster business confidence and attract long-term investment. He recommended that the SBP hold its next policy review on November 25 to assess further cuts, proposing that such an approach would build investor trust and promote sustainable growth.

Balancing Growth with Financial Stability

Overall, business leaders support the SBP’s recent easing of the policy rate but call for deeper cuts to foster economic growth. They emphasize the need for a rate that enables affordable borrowing, supports the manufacturing sector, and reduces financial strain on businesses. These industry voices highlight the critical balance between encouraging growth and maintaining financial stability, underscoring the importance of a flexible, responsive monetary policy in driving Pakistan’s economic progress.