KARACHI: President of the Karachi Chamber of Commerce and Industry (KCCI), Muhammad Jawed Bilwani, has expressed strong disappointment over the State Bank of Pakistan's (SBP) recent decision to implement a nominal 1 percent reduction in the policy interest rate. He criticized the move as being insufficient to address the country's economic challenges and stimulate growth.
According to a statement by Karachi Chamber of Commerce and Industry, President Bilwani emphasized that the decision reflects a lack of urgency in tackling the financial and economic issues faced by businesses, particularly small and medium enterprises. He noted that despite assurances from the Prime Minister about reducing the interest rate, the SBP has maintained it at 12 percent, a figure that the business community finds difficult to comprehend.
Bilwani pointed out that businesses are under severe strain due to rising input costs, including energy tariffs, fuel prices, and raw material expenses, coupled with a volatile exchange rate. In this context, the high interest rates have heightened the financial burden, making it nearly impossible for businesses to secure affordable credit for working capital and expansion.
He argued that the recent decline in inflationary pressures provided an opportunity for a more aggressive cut in interest rates. Pakistan's annual consumer price inflation rate dropped to 4.1 percent in December 2024, the lowest in more than six years. This significant decrease is attributed to a stable currency, lower global commodity prices, and improved supply chains.
Bilwani also highlighted that Pakistan's policy rate remains significantly higher than its regional counterparts, putting local businesses at a disadvantage in terms of cost competitiveness. India, for instance, maintains a policy rate of 6.50 percent, indicative of a proactive monetary policy aimed at stimulating industrial growth and attracting investment.
Furthermore, he noted that high interest rates deter investment in productive sectors and push investors towards speculative markets, further straining the economy. The lack of affordable credit has severely impacted industries, especially export-oriented sectors, at a time when enhancing exports is crucial for addressing Pakistan's balance of payments crisis.
Bilwani cited international financial institutions, including the International Monetary Fund (IMF), which have acknowledged the importance of aligning monetary policies with growth objectives. While fiscal discipline is essential, there is an urgent need for policies that prioritize economic activity and employment generation. He called for a more pragmatic approach to monetary policy that aligns with the government's objectives of economic growth, export enhancement, and employment generation.