SAI chief stresses need for lowering policy rate to fuel industrial growth

KARACHI: Business community has urged the government and the State Bank to lower the policy rate in line with industry expectations to promote industrial growth and increase employment opportunities.

Ahmed Azim Alvi, President of SITE Association of Industry Karachi, has termed the State Bank of Pakistan’s decision to maintain the policy rate at 12% against the expectations of the business community as disappointing.

In a statement, he said that the business community had hoped that the central bank would reduce the policy rate by at least 2% considering the gradually decreasing inflation in the country, but this did not happen, causing concern among the business community.

SAI chief further stated that the continuous reduction in inflation and the country’s progress towards improvement are positive signs that the central bank should have considered.

The business community has consistently demanded that the interest rate be brought down to single digits, but the Monetary Policy Committee does not seem to take our demands seriously. He emphasized that industrial growth is crucial for the country’s development, and easy access to loans on favourable terms can certainly set the country on the path to progress.

Ahmed Azim Alvi appealed to the State Bank of Pakistan to support the government’s efforts to promote industries and contribute to the realization of Prime Minister Shahbaz Sharif’s vision. He urged the central bank to gradually reduce the policy rate and bring it to a single-digit level so that loans can be accessed at lower rates, enabling faster economic activity.

Ahmed Sheikh, the acting President of the Korangi Association of Trade and Industry (KATI), has expressed disappointment over the State Bank of Pakistan’s decision to maintain the interest rate at 12%. Calling the move ineffective for economic growth, he criticized the central bank for failing to meet industry expectations.

Sheikh pointed out that inflation in Pakistan has dropped to its lowest level in nine years, which should have justified a significant reduction in interest rates. However, he claimed that the central bank, influenced by its negotiations with the International Monetary Fund (IMF), has opted for a cautious approach, keeping the rate unchanged despite inflation being much higher when the previous decision was made.

“This decision contradicts the expectations of the business community and could put further pressure on economic activity instead of fostering real improvement,” Sheikh stated. He emphasized that industrialists and investors are already struggling under the burden of high borrowing costs.

The KATI acting President argued that for the economy to grow, affordable financing must be made available, but high interest rates remain a major hurdle. He noted that business leaders have long demanded that the policy rate be brought down to single digits to reduce operational costs and encourage new investment. However, the State Bank’s latest decision has left them disappointed.

Copyright Business Recorder, 2025