Federation of Pakistan Chambers of Commerce and Industry (FPCCI) president Haji Fazl Kadir Sherani welcomed the State Bank’s decision to lower the discount rate by 150 basis points to 10.5 percent.

He said the significant reduction in the key rate depicts the government’s intention to increase trade and investment. “The reduction of interest rate will be a positive change for business community, which is facing serious energy crisis, law and order and threats of ransom demands against kidnapping,” he said.

He said the FPCCI, for a long time, had been demanding the reduction in the discount rate to enhance the production, which is badly affected by various reasons, including the high discount rate.

Due to high discount rate in the region and in the world, the production of Pakistan had become uncompetitive. “We demand the central bank to reduce the rate further to single digit,” he said.

“Political stability, sufficient energy and controlled law and order are must along with cut in interest rate for creating investment climate in Pakistan,” said Irfan Moton, chairman of SITE Association of Industry.

He said that the availability of interest free loan would even not work for industrialisation in the country if stability on said fronts was not guaranteed by the rulers. Majyd Aziz, former president of Karachi Chamber of Commerce and Industry (KCCI), said that he was not expecting such a significant reduction in the policy rate. “The decision should bring back life to the local economy,” he said.

Aziz said that the rate cut might have made the financing cost manageable for new ventures in the industrial sector. However, he asked the government and banks to avoid aggressive lending to the government. “Reduction in government’s borrowing from banks is a must for expediting investment process in the industrial sector,” he said.

He also asked banks to reduce increasing spreads - the gap between banks’ interest rate and rate of return on deposits. This would also help to enable investment climate in the country.

Younus Bashir, senior vice president, KCCI said that it is a welcome move from the SBP. The central bank accepted the demand of the business community by lowering the rate, he said.

The reduction in discount rate will provide some relief to manufacturers, who are facing numerous difficulties. However, new investment and manufacturing activities are linked with government surety of power availability and ensuring peace, he added.

Anjum Nisar, former president, KCCI, said the reduction of interest rate is a bold step by the SBP. “It is an unexpected move of the central bank because we were hoping for a 50 to 100 bps reduction in the monetary policy,” he said.

According to him, the present decision will also reduce the non-performing loans as the business community would able to pay back their outstanding dues on time. “Economic growth can only be achieved through active participation of private sector,” he added.