The Sarhad Chamber of Commerce and Industry (SCCI) on Monday expressed dismay over the State Bank of Pakistan's (SBP) decision to keep the policy rate unchanged. Junaid Altaf, president of SCCI, stated that reducing the policy rate to single digits is essential for industrial revival, ease of doing business, and sustainable economic growth.
Call for Monetary Policy Realignment
The SCCI chief urged the central bank to align its monetary policy with ground realities, warning that the current interest rate regime is strangling the economy and burdening taxpayers. He called on the government to create a pro-business environment by cutting interest rates, lowering power tariffs, and supporting export-led growth.
Inflation Below 5% Justifies Rate Cut
Junaid Altaf referenced official figures showing inflation below five percent, arguing that the policy rate of 11.5 percent is unjustifiable. He noted that Pakistan's interest rate is nearly double that of regional competitors, putting local businesses at a disadvantage.
Businessmen face significant challenges due to high borrowing costs, leaving them in an outlandish situation compared to international competitors with more favorable lending conditions, he remarked.
Key Reasons for Rate Reduction
Altaf explained that reducing the policy rate would increase currency value, support macroeconomic indicators, boost domestic demand, improve industrial activities, and reduce the current account deficit, given inflation below 5.1 percent and $1.6 billion in foreign exchange reserves. He also noted that lowering the rate would ease pressure from the trillion-rupee domestic debt.
He said reduction in interest rates will lead the country toward sustainable economic growth, with rapid expansion of businesses and industries.
Concerns Ignored by Policymakers
However, Altaf lamented that the business community's concerns have been consistently ignored. He warned that while businesses may still operate, profit margins are shrinking drastically, making it hard for firms to cover expenses.
The SCCI chief urged SBP to bring the policy rate to a single digit, targeting 6 percent within three to four months, aligning Pakistan with regional benchmarks and unlocking economic potential. Reducing the interest rate would cut domestic debt servicing costs by half, stimulate business activity, create jobs, and make Pakistan competitive globally, he asserted.
