Karachi: Iftikhar Ahmed Sheikh, President of the Karachi Chamber of Commerce and Industry (KCCI), has expressed disappointment with the State Bank of Pakistan's recent decision to reduce the interest rate by only 1 percent to 19.5 percent. The KCCI had anticipated a more significant cut, advocating for a reduction of 300 to 500 basis points to align more closely with international standards and significantly lower business costs.

According to Karachi Chamber of Commerce and Industry, Sheikh highlighted the need for aggressive rate cuts to reach single-digit levels, ideally around 7 to 8 percent. Such a move, he argued, would encourage borrowing and business expansion, fostering favorable economic conditions. He noted that while the State Bank of Pakistan has made a second consecutive rate cut—bringing rates down from 22 percent to 20.5 percent, and now to 19.5 percent—the current level remains too high to effectively stimulate economic growth and alleviate the financial burden on businesses and consumers.

Sheikh also criticized the central bank’s previous tight monetary policy stance, which he claimed led to prohibitively expensive borrowing and significant losses across the economy, particularly impacting the manufacturing sector. He emphasized that substantial relief in the form of deeper interest rate cuts is now imperative. “We appreciate the second consecutive reduction in interest rate and hope that the trend continues with SBP reducing the policy rate by at least 300 to 500 basis points in its next review,” Sheikh added.

Further commenting on inflation dynamics, Sheikh mentioned that the recent decrease in inflation in Pakistan was not primarily due to the central bank's monetary policy but rather resulted from administrative measures by the government, improved agricultural outputs, and stability in the rupee's value. He underscored that the significant amount of imports tied to the country's economic structure makes the rupee's valuation crucial in controlling inflation.

Sheikh remains hopeful for further interest rate reductions, which he believes would be enthusiastically received by Pakistan's business community, currently burdened by high operational costs.