KCCI urges SBP to bring key policy rate down to around 6pc

KARACHI: President Karachi Chamber of Commerce & Industry (KCCI), Muhammad Jawed Bilwani, has strongly urged the State Bank of Pakistan (SBP) to announce a substantial cut in the key policy rate, bringing it down to around 6 percent, in order to align Pakistan’s interest rate regime with regional economies and to ease the rising cost of doing business in the country.

President KCCI emphasized that Pakistan’s interest rate remains unjustifiably high compared to regional peers, putting immense pressure on the business community and impeding industrial growth. “Interest rates in Vietnam stand at 6.3 percent, Cambodia at 3 percent, Indonesia at 6 percent, and India at 5.5 percent. Yet, businesses in Pakistan are struggling with exorbitantly high borrowing costs.

Similarly, our electricity tariff is approximately 16 cents per unit, compared to 9 cents in Bangladesh, 8 cents in Vietnam, 10 cents in Cambodia and Indonesia, 7.2 cents in India, and just 5 cents in Sri Lanka,” he noted. “These figures clearly demonstrate that Pakistan is far behind regional countries in terms of competitiveness.”

He stressed that the SBP must urgently consider slashing the interest rate to 5–6 percent to provide much-needed relief to businesses, especially small and medium-sized enterprises (SMEs), which are severely impacted by the high cost of financing.

Jawed Bilwani further recommended structural reforms in the lending ecosystem, pointing out that government borrowing currently consumes over 75 percent of available credit, leaving less than 25 percent for the private sector. “This imbalance must be corrected through policy intervention. A more business-friendly interest rate will encourage private sector investment and generate employment, ultimately revitalizing the economy.”

Criticizing the SBP’s recent decision to pause the downward trend in the monetary policy, Jawed Bilwani termed it a contradiction to earlier government assurances. “The Prime Minister had promised that by the end of 2024, interest rates would be brought down to single digits. However, more than half of 2025 has passed, and the rates are still stuck in double digits,” he lamented.

He added that interest rate reduction alone is not sufficient. “Pakistan remains uncompetitive not only due to high borrowing costs but also because of excessive electricity, gas and water tariffs, high tax rates, elevated port charges, and one of the highest minimum wages in the region while labour productivity continues to lag behind. All of these elements collectively shape the cost of doing business, and they must be rationalized.”

President KCCI stressed the urgent need for a comprehensive national strategy to align Pakistan’s industrial input costs with regional benchmarks. “If we truly aim to boost exports and attract investment, we must ensure that at least one or more of our industrial cost components, be it energy tariffs, taxes, or financing, are lower than those in competing economies. Only then can we provide a real edge to our industries.”

Highlighting the broader impact of unaffordable electricity tariffs, he urged the government to promote industrial consumption of electricity through reduced rates. “The solution lies in increasing electricity buyers by enabling the setup of new industries. This is only possible if interest rates and other input costs are made attractive enough for investors.”

President KCCI concluded by urging the central bank to work hand-in-hand with the business community in evolving policies that foster industrialization, boost exports, and uplift the national economy.

Copyright Business Recorder, 2025