Karachi Chamber of Commerce and Industry (KCCI) President Muhammad Jawed Bilwani rejected the State Bank of Pakistan (SBP)’s 1 percent cut to the interest rate as insufficient to address the prevailing economic challenges and unlock the country’s growth potential.
In a statement, Bilwani claimed the decision reflected a lack of urgency in addressing the critical financial and economic issues faced by businesses. “Despite the prime minister’s assurances of bringing the interest rate down, the SBP has kept it to 12 percent, which the business community is unable to understand,” he said.
Maintaining businesses were operating under severe strain due to an unprecedented increase in input costs, including energy tariffs, fuel prices, and raw material costs, he said the high interest rates were exacerbating the financial burden, hampering the ability to access affordable credit for working capital and expansion. The nominal cut in the policy rate, he stressed, failed to provide the relief that the business community needed for economic recovery.
Claiming the recent decline in inflationary pressures left ample room for the central bank implement a more aggressive cut in interest rates, he said it would send a strong signal to domestic and international investors that Pakistan was committed to fostering a business-friendly environment. Instead, he lamented, the marginal adjustment appeared overly conservative, doing little to address the underlying economic stagnation.
The KCCI president further noted Pakistan’s policy rate remained significantly higher than its regional counterparts, reducing the cost competitiveness of local businesses. He noted India’s policy rate stood at 6.5%, stimulating industrial growth and attracting investment. Pakistan’s restrictive monetary policy, he said, hindered economic progress and exacerbated unemployment.
High interest rates, he continued, discouraged investment in productive sectors and pushed investors toward speculative markets such as real estate and foreign exchange, further straining the economy. The lack of affordable credit, he said, had severely impacted industries, especially export-oriented sectors, when enhancing exports was critical for addressing Pakistan’s balance of payments crisis. “A substantial reduction in interest rates would have provided relief to businesses, encouraged investment, and helped stimulate consumer demand,” he claimed.
Bilwani claimed international financial institutions, including the International Monetary Fund (IMF), recognized the importance of aligning monetary policies with growth objectives. Acknowledging the need for fiscal discipline, he said it must accompany policies prioritizing economic activity and employment generation. The SBP’s cautious approach, he regretted, reflected an over-reliance on inflation targeting without adequately addressing growth and employment concerns.
The KCCI president called for a more holistic and pragmatic approach to monetary policy, aligning not only with regional counterparts, but also the government’s broader objectives of economic growth, export enhancement, and employment generation.