Business leaders demand single-digit policy rate to revive economy

KARACHI: The business community has urged the State Bank of Pakistan (SBP) to reduce the policy rate to single digits as the central bank prepares to revise it in its upcoming monetary policy meeting on Monday.

President of the SITE Association of Industry Karachi Ahmed Azeem Alvi called for a reduction in the policy rate, citing the recent decrease in inflation. He stressed that providing loans at lower interest rates is essential for industries to compete in international markets. Alvi urged the SBP to seriously consider this demand in the best economic interests of the country, enabling the industrial sector to address challenges such as high production costs and financial constraints effectively.

Alvi further noted that the current policy rate of 13 per cent remains excessively high and argued that there is significant room for a reduction given the declining inflation. “It is incomprehensible why the State Bank has not yet lowered the policy rate to single digits,” he stated. Alvi proposed a five percentage point cut in the policy rate, emphasising that a gradual reduction would positively impact the national economy. He added that lower interest rates would encourage borrowing, address capital shortages, and restore industrial activity to its normal pace.

Chairperson of the Pakistan Chemicals & Dyes Merchants Association (PCDMA) Salim Valimuhammad echoed the call for a single-digit policy rate, underscoring its importance in boosting business activity and revitalising the economy. Valimuhammad pointed out that the Monetary Policy Committee (MPC) should consider the falling inflation rate and significantly reduce interest rates.

He explained that lower interest rates would encourage businesses to borrow from banks at a lower cost, easing capital shortages. Valimuhammad also highlighted that high interest rates have historically led individuals to invest in banks for higher returns. A single-digit policy rate, he argued, would redirect capital back to markets and industries, reviving both business and industrial activities.

Reiterating his stance, Valimuhammad stressed that the government must adopt business-friendly measures to support industrial and commercial growth. Without such steps, he warned, the government’s economic efforts would yield little progress.

Chairperson of the Pakistan Vanaspati Manufacturers Association (PVMA) Sheikh Umer Rehan also urged the SBP to bring down the policy rate to single digits during the MPC meeting on January 27. Rehan argued that the current interest rate of 13 per cent is creating severe challenges for the industrial sector and called for immediate measures to restore economic stability.

Rehan highlighted that the country’s interest rate is among the highest in the region, exacerbating inflation and financial burdens on businesses. The high cost of borrowing has increased operational expenses, slowed industrial production and hindered economic growth. He added that elevated interest rates are limiting access to loans, restricting new investments, and raising the overall cost of doing business.

The business leaders collectively emphasised that reducing the policy rate is critical to revitalising Pakistan’s industrial and economic landscape, calling on the SBP to prioritise this demand in its upcoming meeting.