State Bank of Pakistan Urged to Cut Interest Rates
The decision to cut interest rates could have a significant impact on Pakistan's economic growth, with industrialists and businessmen urging the SBP to take bold action to support local industries and boost exports, and the MPC's upcoming meeting is expected to be closely watched by the business community.
Industrialists in Pakistan are calling for the State Bank of Pakistan (SBP) to reduce interest rates to single digits, citing the current 12% rate as a significant barrier to economic growth, with the Monetary Policy Committee (MPC) set to meet on May 5.
The Hyderabad Chamber of Small Traders & Small Industry's former President Muhammad Farooq Shaikhani and SITE Superhighway Association of Industry (SSHAI) President Masood Pervaiz are among those advocating for a rate cut, arguing that previous minor reductions have failed to benefit small and medium-sized enterprises (SMEs). They suggest that a 4% reduction is necessary to bring rates into single digits, making financing more affordable for entrepreneurs and enabling them to invest, expand, and compete.
The industrialists also argue that the government must take steps to support SMEs, establish new businesses, and boost exports to achieve sustainable economic growth and self-reliance. Pakistan maintains the highest interest rate regime in the region, making the business case uncompetitive for local industrialists and businessmen, according to SSHAI President Masood Pervaiz. Federal B Area Association of Trade and Industries (FBATI) President Shaikh Muhammad Tehseen believes that a substantial cut in policy rate is necessary to promote the investment climate and support export-oriented sectors.
The State Bank of Pakistan (SBP) has recently cut the policy rate to 11% in response to a significant decline in inflation, which fell to 0.3% in April. However, industrialists and businessmen are still urging for further reductions to single digits. SM Tanveer, patron-in-chief of United Business Group (UBG), has demanded a single-digit markup rate in the upcoming monetary policy to revive economic activities in Pakistan, expressing concern that the SBP's reluctance to lower mark-up rates is hindering economic recovery.
As the MPC prepares to meet on May 5, the business community is eagerly awaiting a decision that could potentially boost economic growth and support local industries. A single-digit mark-up rate would provide relief to businesses and industries, enabling them to access credit at affordable rates and invest in expansion and growth, according to Tanveer.