Mr. Atif Ikram Sheikh, President 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) did not change the policy rate on its Monday meeting. Currently, inflation as per government’s statistics, stood at 1.5 percent in February 2024; however, the policy rate is 12.0 percent today – which reflects a premium of 1,050 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 the special investment facilitation council (SIFC) and the Prime Minister’s vision for economic growth and export growth.
FPCCI noted that core inflation is expected to be in the range of 1 – 3 percent for March – April 2025 and throughout the rest of the outgoing fiscal year. Therefore, he demanded that the key policy rate be brought down to 3 – 4 percent by the end of FY25.
Mr. Atif Ikram Sheikh explained that international oil prices are also expected to remain stable. In contrast, oil is a major contributing factor to the ripple effects of inflationary pressures in Pakistan. There is a sufficient oil supply in international and regional markets; spare capacity within the OPEC plus countries will be more than enough to keep oil prices below $70s per barrel in the coming months. Therefore, the authorities in Pakistan now have all the prerequisites to announce a substantive rate cut; and do not hold onto their contractionary and anti-business monetary policy practices, he elaborated.
Mr. Sheikh reiterated the apex body’s stance that Pakistan has the lowest cost of doing business, ease of doing business, and access to finance compared to all its competitors in the export markets. Fortunately, the decisive downward trend in inflationary pressures has been continuing for the past many months, and the only viable solution to get back on the economic growth trajectory is to support industry and exports, he added.
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 commitments to rationalize electricity tariff for industry, and stressed that gas supply shortages or disruptions can’t coexist with any substantive export growth and import substitution initiatives.
