Karachi: In a recent statement, leaders from the Karachi Chamber of Commerce and Industry (KCCI) called on the State Bank of Pakistan (SBP) to significantly lower the policy interest rate by 500 basis points, aiming to reduce it to 14.5 percent from the current 19.5 percent. This recommendation comes in response to declining inflation rates and aims to revitalize economic and industrial activity across the country.

According to Karachi Chamber of Commerce and Industry, the call for a rate cut is supported by the recent decline in inflation to 9.6 percent in August, the lowest in three years, and an upgrade by Moody’s of Pakistan’s credit ratings. KCCI leaders, including Chairman Businessmen Group Zubair Motiwala and President Iftikhar Ahmed Sheikh, argue that the existing high interest rates hinder economic growth, noting the marginal 0.9 percent growth in the Large-Scale Manufacturing Index (LSMI) for FY24. They highlighted the need for lower rates to alleviate the manufacturing sector’s struggles and stimulate broader economic activity.

Further, the statement detailed the disparity in real interest rates between Pakistan and its neighbors, suggesting that lowering rates could enhance Pakistan’s competitiveness in the region. Additionally, a one percent reduction in the policy rate could potentially save approximately Rs467 billion in debt servicing costs, thus lessening the financial strain on the government.

Both Motiwala and Sheikh also pointed to the significant decline in global commodity prices and improved domestic agricultural output as factors that have eased inflationary pressures, reinforcing their call for a rate reduction. They expressed hope that the SBP would adopt this recommendation in its next monetary policy statement, which would be positively received by the business community.