Gohar Ejaz seeks major interest rate cut

With the Monetary Policy Committee (MPC) set to meet on July 30 (Wednesday), former caretaker commerce minister Dr Gohar Ejaz has warned that Pakistan's current interest rate is crippling economic growth.

He pointed out that the country's 11% policy rate against a 3.2% inflation rate results in a punitive real interest rate of 7.8%, nearly double India's 3.4% and over five times China's 1.4%.

In a post on X, Dr Ejaz, who also chairs the Economic Policy & Business Development Think Tank, compared regional economic conditions, noting that Pakistani businesses are paying double the financing costs of their regional counterparts while also facing electricity rates of 12-14 cents per kWh, compared to 5–9 cents in neighbouring countries.

"Pakistani businesses pay double regional financing costs while facing electricity at 12-14 cents/kWh versus 5-9 cents regionally," Dr Ejaz wrote in a post on X.

Meanwhile, he highlighted, unemployment in Pakistan stands at a staggering 22%, in contrast to 4.2% in India and 4.57% in China.

Referring to the country's previous macroeconomic volatility, he wrote: "The 2022 boom-bust cycle with $17.5 billion current account deficit was not caused by low interest rates but by $3 billion vaccine imports and $12 billion in higher oil and gas payments due to Ukraine war-induced global energy price spikes—factors completely unrelated to domestic interest rates."

Dr Ejaz argued that fiscal and monetary policies appear to be working at cross purposes. "FBR targets 18% revenue increase while monetary policy suppresses the business activity generating taxes. State Bank reserves rose $5.4 billion to reach $14.46 billion (as of 18th July 2025) through borrowing—not exports or productive growth." Calling for urgent reforms, he suggested cutting the policy rate to 9% immediately and to 6% by 31st December 2025.