Karachi, September 13, 2024 – The Site Association of Industry (SAI) has urged the State Bank of Pakistan (SBP) to lower interest rates to a single digit, calling for a more aggressive approach to stimulate economic growth.
In a statement issued on Friday, Site Association President Muhammad Kamran Arbi criticized the SBP’s recent 2% rate cut, arguing that it falls short of addressing the challenges faced by businesses in the current economic climate.
While the central bank’s decision to reduce the interest rate by 200 basis points was welcomed, Arbi described it as an inadequate step given the broader economic conditions. “The recent rate cut is a baby step,” he said. “What businesses need is a substantial reduction to single-digit levels to provide a stable environment for future planning and investments.”
Arbi emphasized that the current double-digit interest rates create uncertainty for businesses, making it difficult for them to plan long-term investments. He called for a well-defined, sustainable monetary policy that would include a clear roadmap to single-digit interest rates. “Businesses need certainty. When interest rates are reduced to single digits, we need a clear plan from the government to help us navigate future investments without ambiguity,” Arbi added.
The Site Association president also noted that inflation in Pakistan has already dropped to single digits, leaving the real effective interest rate at approximately 10-11%. He criticized the SBP for its slow response to changing economic conditions and urged the central bank to act decisively. According to Arbi, a more substantial rate cut or a phased reduction of at least 5 percentage points is essential to align the monetary policy with the needs of the business community.
In addition to calling for lower interest rates, SITE Association President advocated for quantitative easing as a means to boost economic activity. He argued that the SBP should prioritize growth by adopting a more accommodative monetary policy to facilitate borrowing and investment. “A single-digit interest rate would not only ease the financial burden on businesses but also encourage expansion and job creation, driving overall economic growth,” he explained.
The demand for a single-digit interest rate reflects the growing concerns within Pakistan’s industrial sector about the cost of borrowing and its impact on business expansion. Many in the business community believe that a lower interest rate is crucial for ensuring long-term economic stability and growth.