UBG chief demands 500bps rate cut

Patron-in-Chief of the United Business Group (UBG), SM Tanveer, has demanded an immediate reduction in the policy rate by 500 basis points, citing a significant drop in inflation from 38% to 6.9%. He also proposed lowering the rate to 8% by January 2025, stressing the urgent need for easing business conditions in light of improving economic indicators.

Tanveer highlighted the positive shift in Pakistan's macroeconomic landscape between June 2023 and September 2024, which paved the way for the International Monetary Fund (IMF)'s approval of its extended package. He credited the government of Prime Minister Shehbaz Sharif and the establishment of the Special Investment Facilitation Council (SIFC) for fostering economic growth and stability.

While acknowledging these improvements, Tanveer cautioned that more efforts were required to revive dormant business activities through single-digit interest rates and affordable energy tariffs. He urged the government to create a more business-friendly environment to promote investment, boost exports, and generate employment.

Recent data shows that GDP grew from 0.29% to 2.38% during the period, with a projected growth rate of 3.9% by 2025. Additionally, the trade deficit reduced from $27.47 billion to $24.09 billion, while the current account balance improved from a deficit of $2.55 billion to a surplus of $0.68 billion.

Export growth was also notable, rising from $27.7 billion to $30.6 billion, driven by a surge in agricultural exports from $4.7 billion to $7.1 billion. Information Technology (IT) exports grew from $2.6 billion to $3.2 billion, remittances increased from $27.3 billion to $30.2 billion, and foreign direct investment rose from $1.63 billion to $1.9 billion.

It is pertinent to note that inflation dropped from 38% to 9.6%, while the policy interest rate fell from 22% to 17.5%. The rupee's value strengthened from Rs333.5 to Rs278 per US dollar between June 2023 and September 2024.