PCJCCI Calls for Interest Rate Reduction to Spur Economic Growth

Lahore: The Pakistan China Joint Chamber of Commerce and Industry (PCJCCI) has urged the State Bank of Pakistan (SBP) to lower the benchmark interest rate from 11% to 6% in its upcoming monetary policy announcement. This appeal comes as Pakistan seeks to bolster its economic recovery and attract investment.

Nazir Hussain, President of PCJCCI, emphasized that key economic indicators, such as a significant drop in inflation and a subdued Consumer Price Index (CPI), signal that the time is right for a shift towards a more accommodative monetary policy. With headline inflation now at 4% and CPI growth at just 0.3%, Hussain noted that the current real interest rate is excessively positive, which is restraining borrowing, spending, and investment.

Brig. Mansoor Saeed Sheikh (Retd), Senior Vice President of PCJCCI, highlighted that the existing policy rate of 11% amidst 4% inflation reflects a conservative approach that hampers industrial growth. He pointed out that a rate cut to 6% could benefit industries, SMEs, and foreign investors by reducing borrowing costs. Sectors such as textiles, agriculture, construction, and manufacturing are currently burdened by high interest rates, and a reduction could lead to increased industrial capacity utilization and expanded SME operations.

Zafar Iqbal, Vice President of PCJCCI, remarked on the interest from Chinese companies in investing in Pakistan’s Special Economic Zones (SEZs), which is currently deterred by high financing costs. He suggested that a reduced policy rate would make Pakistan more competitive in attracting capital flows, as neighboring countries have adopted supportive monetary policies for post-pandemic recovery.

Salahuddin Hanif, Secretary General of PCJCCI, pointed out that lowering interest rates would reduce government debt servicing costs by approximately Rs 3.5 trillion. This could free up fiscal resources for social spending and infrastructure development, improving the nation’s budgetary health and potentially enhancing creditworthiness and investor confidence.

The PCJCCI advocates for a cohesive policy approach that aligns monetary policy with fiscal, trade, and industrial strategies, aiming for inclusive and sustainable economic growth.