'Align monetary policy with regional benchmarks'

The Karachi Chamber of Commerce and Industry (KCCI) and the Hub Chamber of Commerce and Industry (HCCI) have called on the State Bank of Pakistan (SBP) to align the monetary policy rate with regional benchmarks and reduce it significantly.

KCCI President Muhammad Jawed Bilwani emphasised the pressing need for the SBP to align the nation's key monetary policy rate with regional benchmarks to support economic growth and ease the burden on businesses.

He said in a statement on Saturday that instead of advocating for specific interest rate reductions, which have often been overlooked, the Karachi chamber urges policymakers to adopt a strategic approach by benchmarking Pakistan's key policy rate against neighbouring countries, including China and India. These countries maintain substantially lower rates of 3.1% and 6.5%, respectively, creating a favourable business environment and facilitating access to affordable credit.

Bilwani underscored the significant challenges posed by Pakistan's current monetary policy rate, which stands at 13%, still considerably higher than its regional counterparts. Elevated rates deter investment and inflate borrowing costs for businesses, particularly small and medium enterprises (SMEs), which are the backbone of the economy, he said.

"With the key policy rate at 13%, borrowing remains expensive, stifling growth, discouraging entrepreneurship, and limiting job creation. By contrast, regional countries with lower rates have provided their industries with a competitive edge in global markets," he said.

Pakistan has made significant progress in reducing inflation, which declined to 4.1% as of December 2024, marking the lowest level in over six years. He contrasted this with China, which maintains an inflation rate of approximately 0.7%, and India, where inflation stands at around 6%.

"Policymakers must recognise that addressing inflation and aligning interest rates with regional benchmarks are not just desirable but essential steps toward ensuring sustainable growth and global competitiveness. Failing to act will further isolate Pakistan from the economic progress being made by our neighbours," Bilwani concluded.

Moreover, in a separate statement, Hub Chamber of Commerce and Industry President Yakoob H Karim and Former President Ismail Suttar said the central bank must announce at least a 4% reduction in the policy rate (discount rate) in the upcoming Monetary Policy Committee meeting scheduled for Monday, January 27.

The business leaders of Balochistan noted that there has been a reduction in the inflation rate and emphasised that the need of the hour is to accelerate industrial and business growth.