PkRevenue.com – The Karachi Chamber of Commerce and Industry (KCCI) on Monday expressed disappointment over the State Bank of Pakistan’s (SBP) recent rate cut, describing it as a meager reduction.
Earlier in the day, the SBP announced a reduction in the benchmark policy rate by 150 basis points, lowering it from 22 percent to 20.5 percent.
KCCI President Iftikhar Ahmed Sheikh, while welcoming the SBP’s decision to reduce the interest rate by 1.5 percent, voiced the business community’s frustration. “Given the descending inflationary trends, we were expecting a substantial reduction of at least 4 to 5 percent. However, the announced reduction of 1.5 percent is a bit disappointing,” he remarked.
Despite his disappointment, Sheikh acknowledged the SBP’s move to ease monetary policy. “We hope that this approach continues in the days to come, gradually bringing down the interest rate to single digits,” he said. He added that a lower interest rate, in line with international trends, would encourage private sector borrowings, fostering business expansion and industrialization.
Sheikh highlighted that inflation has drastically reduced to slightly above 11 percent from a peak of 38 percent. He attributed this decline not to the SBP’s tight monetary policy but to administrative measures by the government, improved agricultural production, and reduced petroleum prices. “Excellent production of wheat, rice, sugarcane, cotton, and maize has significantly contributed to the reduction in inflation,” he noted.
The stability in the rupee’s value was also a key factor in easing inflation, Sheikh emphasized. “It is well-known that Pakistan imports a significant amount of commodities. Therefore, rupee devaluation directly triggers inflation,” he explained. He credited the government’s crackdown on black-marketing and illegal dollar transactions for the stabilization of the rupee, which subsequently helped ease inflation.
Sheikh described the SBP’s rate cut as a first step in the right direction and expressed hope for further reductions. “A continued reduction in the interest rate would be widely welcomed by the entire business community, which has been severely impacted by the exorbitantly high cost of doing business,” he asserted.
The KCCI’s call for a more substantial rate cut reflects the broader business community’s desire for more aggressive monetary easing to stimulate economic growth and reduce the cost of capital. As the SBP navigates its monetary policy amidst fluctuating economic indicators, the balance between controlling inflation and fostering growth remains a critical challenge.
