Karachi, January 27, 2025 – The Karachi Chamber of Commerce and Industry (KCCI) on Monday voiced its strong discontent over the State Bank of Pakistan’s (SBP) decision to implement a modest 100 basis points (bps) reduction in the benchmark policy rate, bringing it down from 13% to 12%.
KCCI President Muhammad Jawed Bilwani expressed profound disappointment, labeling the move insufficient to address Pakistan’s prevailing economic challenges. He argued that the slight cut reflects a lack of urgency and a missed opportunity to foster growth and alleviate the severe financial strain faced by businesses nationwide, particularly small and medium enterprises (SMEs).
“Despite assurances from the Prime Minister to bring interest rates down substantially, the SBP has opted for a cautious reduction. This fails to meet the expectations of the business community,” President Bilwani remarked.
He highlighted the daunting challenges businesses are enduring, including skyrocketing input costs, surging energy tariffs, fluctuating fuel prices, and a volatile exchange rate. These factors, combined with persistently high interest rates, have rendered affordable credit inaccessible, stifling opportunities for working capital and industrial expansion.
Bilwani noted that the recent decline in inflation presented a prime opportunity for a more aggressive rate cut. Pakistan’s inflation rate, which had soared to a historic high of 40% in May 2023, plummeted to a six-year low of 4.1% in December 2024. This improvement, fueled by a stable currency, declining global commodity prices, and better supply chains, provided ample justification for a bolder monetary policy adjustment.
“A meaningful reduction in the policy rate would have signaled to domestic and international investors that Pakistan is committed to creating a business-friendly environment,” Bilwani said. “Unfortunately, the marginal adjustment demonstrates a conservative approach, leaving underlying economic stagnation unaddressed.”
He further emphasized that Pakistan’s policy rate remains disproportionately high compared to regional economies. India’s rate, for example, stands at 6.50%, enabling its industries to remain cost-competitive and attract investment. In contrast, Pakistan’s restrictive monetary policy continues to hinder growth, discourage investment in productive sectors, and exacerbate unemployment.
Bilwani also criticized the SBP for its over-reliance on inflation targeting at the expense of growth and employment. He urged a more pragmatic and holistic monetary policy that aligns with the government’s goals of boosting exports, creating jobs, and fostering sustainable economic development.
The KCCI called on the SBP to adopt policies that prioritize industrial growth and economic recovery, ensuring Pakistan’s businesses remain competitive in regional and global markets.
