HYDERABAD: Hyderabad and Jamshoro’s business leaders have termed State Bank of Pakistan’s decision to cut policy interest rate by only 2pc as disappointing and urged the federal government to immediately reduce the interest rate to 12pc considering the fact that inflation has dropped.

The chairman of Businessman Panel Progressive of Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Adeel Siddiqui, expressed his disappointment over the SBP’s decision and described it as “too little, too late” in the current economic context.

He pointed out in a press statement that core inflation was expected to reach 7pc in September this year, according to market estimates, and noted international oil prices had dropped to a three-year low of less than $70 per barrel. Despite these factors, SBP maintained a cautious stance, failing to deliver a more substantial rate cut, he said.

He said that business community had anticipated a more aggressive approach from the SBP but instead it continued to pursue regressive and counterproductive monetary policies.

Urge centre to reduce the rate to 12pc

He emphasised Pakistan’s cost of doing business, ease of doing business and access to finance were lagging behind its competitors in export markets.

He underscored the need to support industry and exports to revive economic growth and recommended that SBP focus on core inflation, excluding volatile components like food and energy and prioritise price control measures to combat hoarding and malpractices.

Despite significant hikes in policy rates from 9.75pc to 22pc between 2022 and 2023, general inflation remained high and unresponsive to policy changes, he said.

He advocated monetary and fiscal policies tailored to Pakistan’s unique circumstances, rather than following global trends.

He urged SBP to reduce interest rates to 12pc immediately, enabling Pakistani exporters to compete in regional and international markets by lowering capital costs.

He said this move should be accompanied by government’s promised rationalization of electricity tariffs for industry and renegotiation of independent power producers’ agreements.

Jamshoro Chamber of Commerce and Industry president Yaser Iqbal Malik called upon the government and Monetary Policy Committee to immediately reduce interest rates by 400 basis points (bps) in its forthcoming meeting.

In a press statement he demanded immediate 4pc reduction after fall in inflation rates to 9pc.He claimed bank loans were important source of funding for small businesses, but many of them did not have access to bank loans due to high mark-up rates.

The cost of borrowing remained low in a low interest rate environment which gave a boost to demand for credit and subsequently increased economic activity, he said.

“To sustain economic growth, it is imperative to maintain high growth in industry and trade and for this interest rate should be appropriate,” he argued.

He said that high interest rate was severely affecting businesses, adding policy rate cuts announced over last two monetary policy meetings were too little. “Hence, interest rates should be brought down immediately to reduce cost of doing business enabling Pakistani exporters to compete internationally and regionally,” he added.

He said that Pakistan’s exporters were ousted from international market due to very steep production cost. The business community was not hopeful about job creation without a ‘forbidding policy rate’, a depressing prospect for a country where 110m people living below poverty line, he said.

Published in Dawn, September 13th, 2024