Pakistani businessmen urge further interest rate cut

Emphasise on keeping economic activity alive to avert crisis

KARACHI: Businessmen have criticised the State Bank of Pakistan (SBP) for a mere 1% reduction in the benchmark interest rate on Friday despite clear message by all segments, particularly trade and industry, for a sizeable cut.

In a statement, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Mian Anjum Nisar expressed serious reservations against slight reduction in the interest rate.

“Given the current deteriorating economic situation, all central banks are supporting their economy by significantly cutting the interest rate along with stimulus packages,” he said. “The current decision is not based on forward looking inflation.”

He underlined that the chamber agreed with the condition of external account detailed in the monetary policy statement where the current account deficit (CAD) was expected to remain in control just like it was in April.

However, in May and June, imports will be even lower than $3 billion per month on account of fewer orders placed by importers due to depressed demand under worldwide lockdown. Nisar said that since SBP expects external situation to be manageable, there was sufficient information available on the inflation front to forecast a much lower rate than 7-9% forecasted for next year by the central bank.

On the other hand, Karachi Chamber of Commerce and Industry (KCCI) President Agha Shahab Ahmed said the 100 basis points cut in the interest rate was still insufficient keeping in view the coronavirus crisis. He stressed that the interest rate should be slashed to 4% in one go.

“A major cut in interest rate will give the much needed impetus for economic revival,” he said. “It is very important to keep the wheels of the economy rolling to avert the economic crises which will have long-term adverse implications.”

He stressed that businesses should continue their operations, which are crucial for generating revenues for the national exchequer and keeping the foreign exchange reserves stable through exports.

He was of the view that this would in turn help the government meet its financial obligations and allow it to keep the economy afloat. The situation is dire but the damage can be minimised through business-friendly policies and incentives.

Published in The Express Tribune, May 17^th, 2020.

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