KARACHI: Chairman Businessmen Group (BMG), Zubair Motiwala and President Karachi Chamber of Commerce & Industry (KCCI), Muhammad Rehan Hanif have urged the State Bank of Pakistan (SBP) to reduce policy rate by at least 100 basis points to being the interest rate down to 10 percent as inflation had considerably moderated compared to the high levels witnessed in 2024, which had created adequate space for monetary easing.
Chairman BMG and President KCCI noted that the SBP’s policy rate had remained unchanged at 11 percent for the fourth consecutive time, including the most recent decision announced on 27th October 2025 but maintaining such a high rate for an extended period was placing a significant burden on the economy, hence, it is high time to bring it down by at least 1 percent.
They further mentioned that Pakistan’s external sector had shown signs of improvement, supported by program inflows and a gradual strengthening of foreign exchange reserves, which had collectively reduced pressure on the macroeconomic framework. In light of these developments, they emphasized that holding the policy rate at historically elevated levels was adversely affecting industries, SMEs, exporters and investors, who were facing exceptionally high financing costs that were stifling investment and hampering the revival of economic activity and employment.
They remarked that a reduction of at least 100 basis points would likely provide the necessary stimulus to revive investment sentiment. They stated that lower borrowing costs would ease the financial strain on businesses, improve their working-capital position, and encourage them to undertake expansion and hiring plans that had been repeatedly delayed due to high interest rates.
They also believed that a timely policy rate reduction would help redirect bank lending toward productive sectors rather than concentrating disproportionately in government securities, thereby supporting real economic growth.
While acknowledging that the SBP had a responsibility to remain vigilant about inflationary pressures, they stressed that the prevailing economic indicators suggested that a carefully calibrated rate cut, accompanied by clear communication and appropriate safeguards, would not compromise price stability. Instead, it would contribute meaningfully to rebuilding business confidence and accelerating the recovery process.
They further underscored that Pakistan’s policy rate of 11 percent had become one of the highest in the region, whereas several peer and competitor economies were operating with substantially lower benchmark rates that directly supported their industrial and export competitiveness. They noted that the Reserve Bank of India (RBI) continued to maintain its repo rate at around 5.25 percent, the Central Bank of Sri Lanka (CBSL) had brought its Overnight Policy Rate down to approximately 7.75 percent, Vietnam’s refinancing rate stood at 4.5 percent, Nepal’s policy rate was also around 4.5 percent, and Bangladesh’s repo rate was positioned at 10 percent.
Copyright Business Recorder, 2025