KARACHI: Atif Ikram Sheikh, President FPCCI, has apprised that the business, industry and trade community of Pakistan is dissatisfied with the monetary policy as it continues to be based on a heavy premium vis-a-vis core inflation as the State Bank of Pakistan (SBP) announced a grossly insufficient reduction of merely 100 bps on 27th January in its last Monetary Policy Committee (MPC) meeting.
He emphasised the fact that the inflation is at a 9-year low in the country.
He maintained that inflation, as per government’s own statistics, stood at 1.5 percent in February 2025 and 2.4 percent in January; but, the policy rate is 12.0 percent as of today – which reflects a premium of 1050 basis points vis-a-vis core inflation, he added.
In line with expectations: SBP reduces key interest rate by 100bps, takes it to 12%
Atif Ikram Sheikh continued that after deliberations across all industries and sectors, the FPCCI demands an immediate and single-stroke rate cut of 500 basis points, in the upcoming MPC meeting on March 10, 2025 to rationalise the monetary policy; and, align it to the vision of special investment facilitation council (SIFC) and the Prime Minister’s vision for economic growth and exports’ growth.
He said that as per industry estimates, the core inflation is expected to be in the range of 1 – 3 percent in Q4FY25; i.e. April – June 2025 on the back of declining prices and easing inflationary pressures.
Atif Ikram Sheikh explained that the international oil prices are also expected to remain stable; whereas, oil is one of the major contributing factors in creating ripple effects of inflationary pressures in Pakistan.
There is sufficient oil supply in international and regional markets; and, spare capacity within the OPEC plus countries will be more than enough to keep oil prices in the lower side of $70 per barrel in the coming months. Therefore, the authorities in Pakistan now have all the prerequisites to announce a substantive rate cut; and do not hold onto their contractionary and anti-business monetary policy practices, he elaborated.
The FPCCI chief reiterated the apex body’s stance that cost of doing business; ease of doing business and access to finance in Pakistan is at the lowest as compared to all its competitors in the export markets. Fortunately, the decisive downward trend in inflationary pressures has been continuing for the past many months; and, the only viable solution to get back on economic growth trajectory is to support industry and exports, he added.
Saquib Fayyaz Magoon, SVP FPCCI, proposed that the interest rate should come down to single digits immediately to enable Pakistani exporters to some extent to compete in the regional and international export markets through reducing the cost of capital in a meaningful way.
This step should be accompanied by the fulfilment of government’s promise to rationalize electricity tariff for industry.
Copyright Business Recorder, 2025
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