Business community demands ‘significant’ cut in interest rate

KARACHI: Business community has urged a significant cut in interest rates ahead of July 30 MPC meeting, saying a cut in policy rate will provide breathing space for industrial revival and job creation.

Junaid Naqi, President of the Korangi Association of Trade and Industry (KATI), called for a substantial reduction in the policy interest rate in the upcoming Monetary Policy Committee (MPC) meeting scheduled for July 30.

He stated that with inflation falling to 3.2% in June and the current policy rate standing at 11%, there is no justification for maintaining such a high rate.

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Naqi emphasised that Pakistan’s industrial sector is already under severe pressure. “Factories are operating at partial capacity, new investments have slowed, and business confidence is low,” he said. “It is imperative that the government and the State Bank of Pakistan provide immediate relief to revive industrial activity and boost exports.”

Highlighting the broader economic picture, Naqi pointed out that Pakistan’s GDP grew by only 2.1% in the previous fiscal year, significantly lower than other countries in the region. “With the right support and a business-friendly environment, our growth rate can improve substantially,” he said.

He criticized the continuation of outdated monetary policies that he believes are obstructing economic progress. “Across the globe, countries are reducing interest rates to stimulate business activity. Unfortunately, Pakistan is still sticking with old policies that are hurting rather than helping the economy.”

Naqi demanded that the policy rate be slashed in the upcoming MPC meeting to provide relief to the industry. “If industries are not supported now, we could see rising unemployment, declining investment, and missed revenue targets,” he warned.

He urged the central bank to take decisions based on ground realities, saying: “A stable economy can only be built on realistic and responsive policies.” Expressing hope, he added that the government and SBP would recognize the challenges faced by the industrial sector and take concrete steps to ease the burden, including a meaningful cut in interest rates to help stabilize the economy.

However, President of Pakistan Business Forum, (PBF) Khawaja Mehboob ur Rehman, stated that after extensive deliberations across all major industries and sectors, the PBF unanimously demands an immediate and single-stroke rate cut of 500 basis points in the upcoming Monetary Policy Committee (MPC) meeting.

He emphasized that such a decisive move is essential to rationalize the current monetary policy and bring it in line with the vision of the Special Investment Facilitation Council (SIFC), as well as the prime minister’s broader economic growth and export strategy.

Khawaja further noted that the business community remains deeply dissatisfied with the current monetary policy, arguing that it imposes an unjustifiably high premium relative to core inflation. With inflation now down to 4 percent and the Consumer Price Index at just 0.3 percent, maintaining the interest rate at 11 percent defies economic logic and continues to burden the productive sectors of the economy.

“We appeal to the central bank to act with foresight and show empathy towards the productive sectors of the economy. Pakistan cannot afford to stifle its growth potential any longer.”

The PBF maintains that a sharp rate cut is essential to revive industrial output, stimulate private sector investment, and restore Pakistan’s export competitiveness. Lowering borrowing costs will also unlock growth in Small and Medium Enterprises (SMEs), enhance job creation, and provide significant fiscal relief by reducing the government’s debt servicing burden by an estimated Rs3.5 trillion annually.

The Pakistan Business Forum urges the State Bank (SBP) that in its July 30th Monetary Policy Committee to adopt a pragmatic, pro-growth stance that reflects the country’s improving macroeconomic fundamentals.

The forum further stated that SBP being a regulator of the banks in Pakistan, binds banks to offer fair and accessible credit to the SME and start-up sectors, “For too long, the banking industry has operated on its own terms — refusing to extend credit to small businesses while focusing almost exclusively on lending to the government, which is an easier route.”

Particularly in Balochistan, the PBF pointed out the shocking reality that many businesses in the province are effectively excluded from the credit system which is against the fundamental rights of the Constitution of Pakistan.

Copyright Business Recorder, 2025