KARACHI: The Karachi Chamber of Commerce and Industry (KCCI) expressed its disappointment over the limited 200 basis points reduction in the interest rate by the State Bank of Pakistan (SBP) on Monday.
The central bank lowered the policy rate to 13 percent, a move that KCCI President Muhammad Jawed Bilwani described as insufficient. He pointed out that the business community, including KCCI, had been advocating for a much larger reduction of 400 to 500 basis points. The modest cut fails to reflect the ongoing decline in inflation, which fell to 4.9 percent in November, he noted.
Bilwani emphasized that the 200 basis point cut leaves the interest rate at 13 percent, which remains excessively high. He stressed that a more substantial reduction was needed to match the regional and global trends. Drawing comparisons with neighboring countries, he pointed out that countries like India, Vietnam, and Bangladesh have significantly lower interest rates at 6.5 percent, 4.5 percent, and 10 percent, respectively. KCCI has long advocated for a policy rate between 5 and 7 percent, which aligns with global practices to stimulate economic activity.
The KCCI President further explained that a lower interest rate is crucial for encouraging borrowing and expanding business activities. Such a measure would lower the overall cost of doing business and help foster economic growth. Bilwani acknowledged the SBP’s continued efforts to ease its monetary policy, highlighting that this was the fifth consecutive rate cut, reducing the rate from 22 percent to 13 percent. However, he urged the central bank to consider a more aggressive approach in its future reviews.
KCCI remains concerned about the detrimental effects of high interest rates on the business community, particularly the manufacturing sector, which has been severely impacted by the high cost of borrowing. The tight monetary policy has escalated the financial burden on businesses, stalling growth and investment. As a result, the KCCI President reiterated the call for a more substantial rate reduction in the next review, with a target of at least 500 basis points.
Bilwani also addressed the fact that the reduction in inflation was not primarily due to the SBP’s monetary policy but rather a result of global commodity price declines, reduced international oil prices, and local administrative measures that helped control inflation. He concluded by expressing hope that the SBP would continue reducing interest rates, a move that would be warmly welcomed by the business community and would help mitigate the adverse effects of the current high-cost environment. KCCI remains optimistic that further cuts will support economic revival and business expansion across Pakistan.