KARACHI: The Institute of Cost and Management Accountants (ICMA) has welcomed the recent decision by the State Bank of Pakistan (SBP) to reduce the policy rate to 19.5%, viewing it as a positive measure to combat inflation and stabilise the economy. In light of extensive feedback from experts and the business community, ICMA has put forth a series of recommendations aimed at further bolstering economic growth and stability.
The Institute has recommended:
Further Rate Reductions: ICMA advocates for additional cuts in the policy rate to support economic expansion and lower borrowing costs. Targeting single-digit interest rates is seen as a crucial step to encourage borrowing and business growth. The organization highlighted that previous high rates had led to expensive borrowing and a suppressed manufacturing sector, underscoring the necessity of further reductions.
Inflation Monitoring: Continuous vigilance over inflation is deemed essential, especially with the potential for rising energy prices. ICMA stresses the need for proactive adjustments to manage inflationary risks effectively.
Support for Business: ICMA emphasizes that further rate cuts will reduce the high cost of doing business. It also calls for measures to stabilize the currency and ensure a reliable energy supply to support industrial activity and job creation.
Financial Sector Stability: Improving liquidity and credit conditions in the financial sector is crucial, according to ICMA. Addressing challenges such as rising non-performing loans is imperative for sustainable economic recovery.
Structural Reforms: ICMA highlights the importance of ongoing fiscal consolidation and structural reforms to maintain economic stability. Effective fiscal policy implementation and timely external negotiations are key components of this strategy.
ICMA urged the SBP to consider more substantial reductions in the policy rate in future Monetary Policy Committee (MPC) meetings.
Copyright Business Recorder, 2024
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