Karachi, November 1, 2024 – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has urged the State Bank of Pakistan (SBP) to implement a substantial interest rate cut in the upcoming Monetary Policy Statement (MPS) scheduled for November 4, 2024.
FPCCI President Atif Ikram Sheikh stated that the business community is deeply concerned with the current policy rate of 17.5%, which remains excessively high despite core inflation standing at 6.9% as of September 2024. This disparity, representing a premium of 1060 basis points, is putting undue strain on businesses.
Sheikh emphasized that after extensive consultations with industry leaders, FPCCI has resolved to demand an immediate rate reduction of 500 basis points. Such a reduction, he argued, would align the monetary policy with the objectives of the Special Investment Facilitation Council (SIFC) and the government’s broader vision for economic growth and exports. “With core inflation projected to hover around 7% in October, it’s imperative for the SBP to recalibrate its policy and reduce the rate to enable sustainable economic growth,” Sheikh added.
The FPCCI president pointed out that global oil prices, a significant inflationary factor for Pakistan, are anticipated to remain stable, with Saudi Arabia potentially lowering crude prices for Asia in December. Given these favorable external conditions, Sheikh argued, Pakistan has a window of opportunity to shift away from the restrictive monetary stance that has hindered economic expansion.
FPCCI’s Senior Vice President, Saquib Fayyaz Magoon, echoed this call for reform, recommending a policy rate reduction to 12.5% to help Pakistani exporters compete regionally. He highlighted that reducing the cost of capital would enhance export competitiveness and stimulate industrial activity. Magoon also urged the government to fulfill its commitment to rationalize electricity tariffs for industries and renegotiate power purchase agreements (PPAs) with independent power producers (IPPs) on a take-and-pay basis to relieve consumers of the burden of capacity charges.
The FPCCI leadership stressed that Pakistan’s cost of doing business remains among the highest in the region, which erodes competitiveness and stifles export growth. With inflationary pressures showing a consistent downward trend, the FPCCI insists that a meaningful rate cut is essential for economic stability.
As the country’s leading trade body, FPCCI has continuously questioned the government’s transparency in economic decision-making. Sheikh urged the government to clarify how it plans to balance the International Monetary Fund (IMF) commitments with maintaining a business-friendly environment. He called on policymakers to engage the business community, stating, “The government must provide a clear strategy to foster growth and outline a timeline for involving business leaders in crafting measures for Pakistan’s economic recovery.”
FPCCI’s plea reflects the wider sentiment among Pakistan’s business community, which is looking to the government to prioritize growth and ease fiscal pressures on industry through decisive policy shifts.
