Karachi, October 2, 2024 – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has called for an urgent and significant reduction in Pakistan’s benchmark policy rate, urging the State Bank of Pakistan (SBP) to lower it to a single digit.
FPCCI President Atif Ikram Sheikh, in a statement issued Wednesday, stressed the need for a swift policy response, recommending a policy rate of 9%, which would better reflect the country’s current economic landscape and inflationary trends.
The FPCCI President underscored the significance of the Consumer Price Index (CPI), which recorded a 44-month low of 6.9% in September 2024. Sheikh pointed out that despite this sharp reduction in inflation, the policy rate has remained disproportionately high. A reduction to 9% would still offer a 200 basis points (bps) premium, maintaining a prudent buffer against inflation, which now stands well below double digits. “Such a move would not only be rational but necessary to stimulate business activity by ensuring more affordable access to finance,” he asserted.
FPCCI president also called for an emergency meeting of the SBP’s Monetary Policy Committee (MPC), emphasizing that waiting for the scheduled November 4th meeting could delay much-needed relief. “We have a unique opportunity to significantly reduce the cost of doing business by acting now,” he remarked. He further highlighted that over the past 16 months, inflation has plummeted from a staggering 38% in May 2023 to the current 6.9%, yet the policy rate has only been reduced by 450 bps, from 22% to 17.5%. “This is a glaring contradiction in economic governance,” he added.
Atif Ikram Sheikh also noted that a reduction in the policy rate would benefit not only the private sector but also the government. A 1% cut in the interest rate would result in approximately PKR 476 billion in debt savings, freeing up substantial resources for critical development projects and welfare initiatives. These savings could be channeled toward infrastructure development, poverty alleviation, and improving education and healthcare systems.
Moreover, the FPCCI president proposed the revival of targeted financial support programs, such as the Temporary Economic Relief Facility (TERF), the Export Finance Scheme (EFS), and the Long-Term Financing Facility (LTFF), to spur industrialization, exports, and investment.
He concluded by stating that both the business community and the general public have endured severe economic hardships in recent years. However, with inflation on a consistent downward trajectory across various sectors, now is the ideal time for the government to pursue pro-growth policies without jeopardizing its ongoing IMF Extended Fund Facility program. “We simply ask for a policy that aligns with the reality of inflationary trends,” he emphasized.
