Mr. Atif Ikram Sheikh, President of FPCCI, has apprised that the business, industry and trade community of Pakistan is disappointed with the monetary policy as it continues to be based on a heavy premium vis-à-vis core inflation as the State Bank of Pakistan (SBP) announced a grossly-insufficient reduction of 100 bps only on Monday. As per the government’s statistics, inflation stood at 4.1 per cent in December 2024. Still, the policy rate is 12.0 per cent today, reflecting a premium of 790 basis points vis-à-vis core inflation, he added.
Mr. Atif Ikram Sheikh continued that, after deliberations across all industries and sectors, FPCCI demanded an immediate and single-stroke rate cut of 500 basis points in Monday’s monetary policy committee (MPC) meeting to rationalize 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. It is pertinent to note that the core inflation is expected to be 3 – 4 percent for January 2025, he added.
Mr. Atif Ikram Sheikh explained that international oil prices are also expected to remain relatively stable. Oil is a major contributing factor in creating ripple effects in inflationary pressures in Pakistan. He added that the authorities in Pakistan now have all the prerequisites to announce a substantive rate cut and not continue their regressive, counterproductive, contractionary, and anti-business monetary policy practices.
Mr Sheikh reiterated the apex body’s stance that Pakistan’s cost of doing business, ease of doing business, and access to finance are the lowest among its competitors in the export markets. Fortunately, the decisive downward trend in inflationary pressures has continued for many months. He added that supporting industry and exports is the only viable solution to getting back on the economic growth trajectory.
Mr 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 by meaningfully reducing the cost of capital. This step should be accompanied by the fulfilment of the government’s promise to rationalize electricity tariffs for industry. The government should renegotiate all independent power producers’ (IPPs) power purchase agreements (PPAs) on a take-and-pay basis, which means that the industry and consumers will be set free from paying capacity charges in their electricity bills, he added.
FPCCI, the apex trade & industry body of Pakistan, has persistently questioned the approach of government, on behalf of the entire business, industry and trade community of Pakistan, in bringing transparency & consultation in economic policymaking and has reiterated its stance that the government should provide answers to the two sets of questions for businesses to plan their investments, : (i) what are the measures or commitments that are being undertaken to stay on course the new IMF program and how would they affect cost of doing business in Pakistan (ii) what steps will be taken to put Pakistan back on an expeditious growth trajectory and how & when the government plans to take the business community into confidence on these measures.
