APTMA calls for 400 basis points cut in interest rate to aid growth

ISLAMABAD: The All Pakistan Textile Mills Association (APTMA) has urged the Monetary Policy Committee (MPC) to lower Pakistan’s high interest rates by 400 basis points, seeing this step as essential to reviving economic growth and supporting struggling industries.

This request comes ahead of the MPC’s scheduled meeting on November 4, 2024, where the rate will be under review.

APTMA’s concerns are centred on the country’s still high interest rate of 17.5 per cent, which, when compared to September’s inflation of 6.9 per cent, translates into an actual interest rate of around 10.6 per cent.

For APTMA, this disparity is unsustainable in the current economic climate. APTMA is of the view that inflation has been constantly declining since November 2023. The data from the Pakistan Bureau of Statistics (PBS) shows a drop from 11.1 per cent in July to 6.9 per cent in September 2024.

However, the central bank has not modified the interest rate to reflect these changes, a decision that APTMA believes is misaligned with current economic trends.

High borrowing costs have put immense pressure on Pakistan’s textile sector, which is critical to the nation’s economy due to its role in exports and job creation.

The APTMA argues that, over the past two years, high-interest rates have severely limited access to affordable financing, restricting the sector’s ability to secure working capital and invest in growth.

Without more financing, the industry’s capacity to compete in global markets and safeguard employment for millions is at risk.

APTMA suggests that a bigger rate cut would encourage investment, boost productivity, and create new jobs in sectors. According to the association, aligning interest rates with lower inflation would relieve financial pressures and help local companies grow, innovate, and remain competitive.

It stresses that a significant rate cut is not merely a preference but a necessary step toward economic recovery. APTMA believes that a more favourable monetary policy would support vital industries and allow the private sector to drive sustainable growth.

For now, it is unclear if the MPC will cut the interest rate or keep it unchanged as there are still nine days left in the meeting and decision will take place after considering multiple factors.

Read next: Gold price falls Rs2,300 per tola from record high