Business community says dissatisfied with meager cut in interest rate

ISLAMABAD: The business community including Federation of Pakistan Chamber of Commerce and Industry (FPCCI) and Islamabad Chamber of Commerce and Industry (ICCI), Monday, expressing dissatisfaction over one percent cut in rate of interest has urged the State Bank of Pakistan (SBP) to bring policy rate below 10 percent in line with the rate of inflation.

FPCCI President Atif Akram Sheikh, following SBP’s announcement of cutting down rate of interest from 12 percent to 11 percent, said that the policy makers should have cut it at least four percent and fixed around seven to eight percent. He said that the government should have followed the global trend and local rate of inflation which is lowest in past 60 years.

Nasir Mansoor Qureshi, president of the ICCI, welcomed the SBP’s decision to cut the policy rate to 11 percent, but noted that the business community had hoped for a reduction into single digit to provide stronger support for economic revival.

Qureshi acknowledged that the move is a step in the right direction, as high interest rates have long burdened the business sector, particularly small and medium enterprises. However, he emphasised that bringing the policy rate below 10 percent was a long-standing demand of the private sector to improve access to affordable financing and boost industrial activity. “The cut to 11 percent will offer some relief to businesses, but a deeper reduction was expected, especially in light of easing inflation and declining input costs,” he stated.

The SBP’s Monetary Policy Committee (MPC) announced the revised rate following its meeting, marking a cumulative 1,000 basis point reduction since June 2024, down from the peak of 22 percent.

Qureshi pointed out that inflation dropped significantly in March and April, largely due to falling electricity tariffs and continued food inflation decline, providing ample justification for a more aggressive rate cut.

He urged the central bank to closely monitor economic indicators and remain responsive to the needs of the business community in future policy decisions. “Lower interest rates are critical to spurring investment, job creation, and sustainable economic growth,” he concluded.

Copyright Business Recorder, 2025