Industrialists call for urgent interest rate cut

Leading industrialists have called on the government and the State Bank of Pakistan (SBP) to take immediate, decisive actions to stabilise the economy, including a reduction in the interest rate by at least 4%. They stressed that such measures would provide significant relief to Small and Medium-sized Enterprises (SMEs), which they described as the backbone of the national economy. Promoting SMEs, they argue, would help boost the country's economic health and resilience.

Syed Raza Hussain, President of the Federal B Area Association of Trade and Industry (FBATI), highlighted the importance of the sustainability and growth of SMEs for the nation's overall prosperity. He stated that stakeholders are continuing to advocate for lower interest rates and innovative financial solutions, focusing on creating an environment where SMEs can thrive and make significant contributions to economic development and resilience.

Hussain also urged the SBP to introduce specialised financial packages or schemes tailored specifically for SMEs. He proposed that these packages focus on helping SMEs develop capital infrastructure, such as buildings and industrial units. This, in turn, would stimulate construction activities in industrial zones and create job opportunities for workers.

In addition to infrastructure support, Hussain advocated for the introduction of financing schemes that would allow SMEs to set up green or solar power plants for their industrial units. Such initiatives, he argued, would offer financing at significantly lower and more affordable rates, empowering SMEs to invest in growth, innovate, and generate employment across various sectors. He also suggested that these schemes be offered in accordance with Islamic financing principles, allowing a broader spectrum of businesses to participate while staying aligned with their faith.

Currently, the interest rate set by the SBP stands at 19.5%, and the central bank is scheduled to hold a monetary policy meeting on September 12. Business leaders hope that this meeting will bring much-needed relief in the form of an interest rate cut.

In a joint statement, United Business Group (UBG) Patron-in-Chief SM Tanveer and Pakistan Business Group Patron-in-Chief Farazur Rehman stressed that, given the current economic conditions and the notable reduction in inflation, an immediate reduction in interest rates has become essential.

They urged both the government and the SBP to act swiftly and decisively, cutting interest rates by at least 4% to alleviate economic pressures. According to Tanveer and Rehman, the current high interest rates are stifling business activities and impeding economic recovery. Reducing interest rates would not only benefit SMEs but also provide relief to larger businesses, helping to restore consumer purchasing power and, in turn, further stabilising the national economy.

Rehman added that moving away from an interest-based system and promoting Islamic banking is crucial for the nation's economic and moral well-being. "Eliminating interest-based financial practices is not just important for economic recovery but is essential for avoiding divine retribution," he said.