Industrialists urge rate cut ahead of MPC meeting

Advocates for single digit rate to boost SMEs, drive sustainable economic growth

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KARACHI:

Industrialists have appealed to the State Bank of Pakistan (SBP) to immediately cut interest rates to single digits in a bid to stimulate industrial activity and drive economic growth.

The current interest rate stands at 12%, while the Monetary Policy Committee (MPC) of the SBP will meet on May 5.

Hyderabad Chamber of Small Traders & Small Industry former President Muhammad Farooq Shaikhani said the current 12% interest rate is unsustainable for economic and industrial growth. Previous minor cuts failed to benefit common businessmen or Small and Medium-sized Enterprises (SMEs).

He suggested that a minimum 4% reduction is essential to bring it into single digits. Without affordable financing, entrepreneurs cannot invest, expand, or compete. If the government truly aims to stabilise the economy, there is no alternative but to facilitate the business community. Only through empowering industries and promoting exports can Pakistan achieve self-sufficiency.

"We demand a cut of at least 4%, bringing the interest rate down to 5%-6%, enabling single-digit financing. This move must practically benefit small traders and industries, which hasn't happened with past reductions. Economic revival is impossible without creating a business-friendly environment. The government must take solid steps to help establish new businesses, boost exports, and support SMEs. Only then can Pakistan move towards sustainable economic growth and self-reliance," he said.

SITE Superhighway Association of Industry (SSHAI) President Masood Pervaiz said Pakistan maintains the highest interest rate regime across the region, which made the business case uncompetitive for local industrialists and businessmen.

The Monetary Policy Committee (MPC) maintained the status quo at 12% in the last monetary policy on a cautious note, therefore, the policy rate should be drastically reduced to benefit businessmen and investors in the country, he said.

He further added that lower interest rates are a win-win for the private sector and the government, as it will attract both local and foreign investment and benefit the government in terms of reducing a huge burden of debt-servicing.

Masood urged the government to fully transmit the impact of the policy rate cut to the economy—unlike with fuel and utility prices—to restore confidence in the private sector. Federal B Area Association of Trade and Industries (FBATI) President Shaikh Muhammad Tehseen however, pinned hope that the banking regulator will announce a substantial cut in policy rate up to a single digital to promote the investment climate and support export-oriented sectors.

He mentioned the country's macroeconomic indicators have witnessed remarkable improvements in recent months, which also reflected the positive GDP growth forecast made by global financial institutions and think tanks.

He suggested that the government should leverage the growth trajectory of the economy with favourable business steps for the private sector, by easing off the cost of doing business, including interest rates, utilities, and logistic expenses.

Tehseen said the production capacity of the industrial units comprising large-scale to medium and small sizes could be scaled up through a comprehensive facilitation process and special incentive financing scheme for these entities.

Pakistan Chemicals & Dyes Merchants Association (PCDMA) Chairman Salim Valimuhammad also echoed the same demand.