The business community expressed a range of reactions to the State Bank of Pakistan’s (SBP) decision to maintain the policy rate at 12 per cent, a move that caught many market analysts off guard.
Analysts had anticipated another reduction in the interest rate, following a cumulative 10 per cent cut over the past 10 months.
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) voiced disappointment in a statement following the announcement. FPCCI President Atif Ikram Sheikh stated that the business and trade sectors had expected a rate reduction, especially with inflation hitting a 113-month low of 1.5 per cent in February 2024.
“The real interest rate now stands at 10.5 percentage points,” he pointed out, adding that industry leaders had called for a sharp 500-basis-point cut in the policy rate.
Sheikh highlighted that core inflation was expected to hover between 1 and 3 per cent from March to April 2025. “Given these projections, we believe the policy rate should be brought down to 3 to 4 per cent by the end of this fiscal year,” he stressed.
FPCCI Senior Vice President Saquib Fayyaz Magoon echoed this sentiment, calling for an immediate reduction of the interest rate to single digits. He argued that lowering the cost of borrowing would help Pakistani exporters remain competitive in regional and global markets.
He further underlined the importance of addressing energy issues, urging the government to follow through on its promises to rationalise electricity tariffs for industry and resolve the persistent gas shortages.
On the other hand, Ehsan Malik, CEO of the Pakistan Business Council (PBC), supported the SBP’s decision to maintain the rate. Malik explained that cutting the rate further could have led to future hikes, given the projected rise in inflation over the next 12 months.
“With inflation forecasted at an average of 8 per cent for the year ahead, a further cut now would likely have been reversed later,” he noted.
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