Karachi, January 25, 2025 – The Karachi Chamber of Commerce and Industry (KCCI) has called on the State Bank of Pakistan (SBP) to lower the benchmark policy rate to align with those of regional economic powerhouses like India and China.
KCCI President Muhammad Jawed Bilwani emphasized the urgent need for Pakistan’s monetary policy to reflect regional benchmarks, citing the economic advantages enjoyed by neighboring countries due to their lower interest rates. He noted that China and India maintain policy rates of 3.1 percent and 6.5 percent, respectively, which provide a conducive environment for business growth and affordable access to credit.
Bilwani pointed out the significant disparity in Pakistan’s policy rate, which currently stands at 13 percent, far higher than its regional counterparts. “Such elevated rates deter investment, inflate borrowing costs, and place undue pressure on businesses, particularly small and medium enterprises (SMEs) that are the backbone of the economy,” he explained.
The KCCI President further elaborated on the detrimental effects of high borrowing costs, which stifle growth, discourage entrepreneurship, and hinder job creation. “By contrast, regional economies with lower interest rates have empowered their industries to compete effectively in global markets,” he said. Bilwani urged the SBP to take a strategic approach by benchmarking the policy rate against regional averages to enhance economic competitiveness.
Highlighting recent economic developments, Bilwani noted Pakistan’s progress in reducing inflation, which has dropped to 4.1 percent as of December 2024—the lowest level in over six years. He contrasted this with China’s inflation rate of approximately 0.7 percent and India’s 6 percent, underscoring the need for Pakistan to leverage its improved inflation figures by reducing the policy rate.
“Aligning our policy rate with regional benchmarks is not just a fiscal adjustment but a necessity to support sustainable economic growth,” Bilwani asserted. He explained that lower interest rates would ease financing costs for businesses, enabling them to invest, expand, and create jobs. High-interest rates, on the other hand, restrict credit availability, impede industrial output, and limit employment opportunities.
The KCCI President also drew attention to the challenges faced by small businesses, many of which struggle to secure financing due to prohibitive interest rates. “This not only hampers individual enterprises but also slows down the broader economy,” he said.
Bilwani urged policymakers to prioritize economic stability and long-term growth by aligning interest rates with regional standards. He argued that failing to address this disparity would leave Pakistan isolated from the economic progress of its neighbors.
“Policymakers must understand that reducing the policy rate is a critical step toward fostering a competitive business environment and ensuring Pakistan’s place in the global economy,” Bilwani concluded, emphasizing the importance of immediate action to secure sustainable growth and prosperity.
