Acting President Karachi Chamber of Commerce & Industry (KCCI) Altaf A. Ghaffar, while commenting on State Bank’s decision to reduce the interest rate by 2 percent to 17.5 percent, stated that although KCCI was expecting a substantial reduction in interest rate by at least 5 percent, it has been reduced by 2 percent only, which is neither enough nor in line with the declining trend in inflation, which has come down to single digits.
“With a reduction of 200 basis points, the key policy rate now stands at 17.5 percent, which was still too high. Hence, it must be reduced more aggressively to quickly go down to single digits at somewhere around 7 to 8 percent, at par with many other countries in the region and around the world,” he added in a statement issued here on Thursday.
Acting President KCCI said that the business community wants to see interest rates down to single digital, which would encourage borrowings and promote expansion due to the reduced cost of doing business, proving favourable for the economy. It is encouraging to see that the State Bank of Pakistan has continued to ease its monetary policy stance as this was the third consecutive cut which brought the interest rate down from 22 percent to 17.5 percent. Still, he added that it needs to be aggressively brought down to stimulate economic growth and ease the financial burden on businesses and consumers.
He stated that that it was a well-known fact that tight monetary policy stance by SBP that led to unprecedently expensive borrowing caused too much loss to the economy, particularly the cost of doing business, which has grossly suppressed the manufacturing sector, hence, relief in the form of substantial cut has become inevitable. “We appreciate the third consecutive reduction in interest rate and hope that the trend continues with SBP reducing policy rate by at least 500 basis points in its next review”, he added.
Although inflation has drastically come down to a single digit in Pakistan’s case, it was not because of SBP’s tight monetary policy stance. Still, due to the government’s administrative measures and improved agricultural production, he opined that agrarian output was excellent. “Stability in rupee value is also one of the major reasons for easing the inflation as it is a well-known fact that huge quantities of commodities were regularly being imported in Pakistan. Hence, devaluation of the rupee directly triggers inflation”, he added.
Altaf Ghaffar hoped to see a further reduction in interest rates, which would be widely welcomed by the entire business community of the country, which has been badly hit due to the exorbitantly high cost of doing business.
