Business leader and former President of the Islamabad Chamber of Commerce and Industry (ICCI), Dr Shahid Rasheed Butt, on Tuesday, lauded the interest rate cut, which will trigger economic activities, reduce unemployment and boost revenue. As expected, inflation was going down; therefore, he said the Monetary Policy Committee of the State Bank of Pakistan cut the key policy rate by 200 basis points.
He added that interest rates are now 13%, the lowest level since April 2022, and the credit goes to the government’s economic initiatives.
Shahid Rasheed Butt said in a statement issued here today that the MPC has been pursuing a monetary easing strategy since June. He noted that inflation was coming down, food prices continued to fall, and the effects of the November 2023 petrol price hike were starting to wear off. The business leader said that inflation may drop even more in the coming months because these causes will likely continue.
Shahid Rasheed Butt lauded the SBP policy of gradually lowering interest rates, which was keeping inflation and pressures on the external accounts in check while also promoting long-term economic growth.
The current account balance helped the SBP’s foreign exchange reserves grow to about $12 billion, even though it meant less money coming in and more money being paid back on government debt. He said there was a clear rise in credit to the private sector, mostly due to easier financial conditions.
The Monetary Policy Statement says that new economic data shows growth prospects are improving. The general crop outlook in the agriculture sector is less likely to be bad, and industrial production is moving faster. Key areas of the large-scale output are already showing strong growth. The current account had a surplus of $2 billion from July to October due to strong worker remittances and exports.
He noted that lower interest payments will allow the government to keep the budget deficit in check, but reaching a primary surplus will require considerable effort. Similarly, to meet the annual income goal, much extra work and steps would be needed.
To achieve the desired economic consolidation, changes should be made to the tax system to increase the number of people who can pay taxes, as the current tax base is a big hurdle in economic development.
Mr Butt said that government initiatives to stabilise the limping economy are highly laudable, which are boosting the confidence of local and foreign investors while the international institutions are now looking favourably at Pakistan.
