Calls for Interest Rate Cut to Aid Business Growth

Karachi: President of the Pakistan Business Forum (PBF) Karachi Division, Malik Khuda Bakhsh, has supported the call by the United Business Group’s Patron-in-Chief, S.M. Tanveer, to reduce the interest rate to 6% in the upcoming monetary policy. Bakhsh emphasized the necessity of this move, urging the Monetary Policy Committee and the Governor of the State Bank of Pakistan to align the interest rate with business community expectations.

Bakhsh noted that the country’s Consumer Price Index (CPI) is currently at 0.3%, with inflation having dropped to 4%. He highlighted the International Monetary Fund’s (IMF) recommendation that interest rates should be close to the inflation rate. The current interest rate of 11% is, according to him, prohibitive for business operations, and a reduction to 6% is crucial for reviving business activities.

He pointed out that the government is responsible for 8.5 trillion rupees in interest-bearing liabilities. By reducing the rate to 6%, the government could potentially save 3.5 trillion rupees, which would positively impact the economy, particularly industries burdened by high interest rates and electricity costs.

Additionally, Bakhsh mentioned that such a reduction could make Pakistani exports more competitive globally, as international interest rates typically range between 4-5%. He criticized budget measures such as Sections 37A and 37B, which grant powers of arrest and detention, arguing that these hinder business growth.

Emphasizing the need for a business-friendly environment, Bakhsh urged the government to reconsider policies that conflict with business interests, advocating instead for conditions that promote growth, investment, and competitiveness.

Bakhsh further stated that with inflation expected to stabilize around a long-term average of 7% in the coming quarters, a rate cut would be beneficial. Sustainable measures are needed to address economic challenges and restore investor confidence. With increasing imports and weak financial flows, the external account is under pressure, necessitating a cautious approach. Despite signs of economic improvement, he stressed that reducing the interest rate to 6% is vital for making loans more affordable and fostering industrial growth.