Industrialists urge SBP to slash interest rates to revitalise economy

KARACHI: Business leaders are advocating for an immediate reduction of 600 basis points (6%) in the interest rate to stimulate economic growth and activate various sectors of the economy.

Currently set at 12 percent, the interest rate has not been adjusted despite claims from the government that inflation is on the decline. The State Bank of Pakistan (SBP) is set to convene its Monetary Policy Committee (MPC) meeting on March 10 to assess the interest rate situation.

Business leaders are calling for drastic measures, including reducing the interest rate to a sustainable 6% over the next five years and implementing an amnesty scheme designed to revitalise the construction industry.

They have also stressed the need for attractive loan schemes to support struggling Small and Medium-sized Enterprises (SMEs), reported The Express Tribune.

A well-known industrialist and exporter from Balochistan, expressed concern about the current interest rate policy. “The key to adjusting interest rates lies in closely monitoring inflation trends over the past three months. With inflation at its lowest in Pakistan, why haven’t we adjusted the rate accordingly? Are we being overly cautious, or do we not desire economic growth? Even if caution remains, a rate cut of at least 150 to 200 basis points is warranted to allow for a positive economic response,” he stated.

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Shaikh Muhammad Tehseen, President of the Federal B Area Association of Trade and Industry in Karachi (FBATI), urged the SBP to bring the policy rate down to single digits on a long-term basis. He said the lower interest rates would encourage industries to leverage financing from commercial banks, thus promoting business expansion and ultimately boosting exports and local production. “This would yield economic dividends, generating new jobs and increasing tax revenues for the government,” he noted.

He added that facilitating SMEs with incentivised financing schemes could spark significant economic growth within months, as they are the backbone of the economy.

Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), shared that after extensive discussions across various industries, the FPCCI is calling for an immediate rate cut of 500 basis points in the upcoming MPC meeting.

This adjustment could rationalise monetary policy and align it with the vision of the Special Investment Facilitation Council (SIFC) and the Prime Minister’s economic growth and export strategy. Sheikh expressed dissatisfaction with the current monetary policy, critiquing its excessive premium compared to core inflation. He noted that the recent 100-basis-point cut announced in the last MPC meeting was insufficient.

Sheikh pointed to the government’s statistics showing inflation at a nine-year low, with rates at 1.5 percent in February 2025 and 2.4 percent in January.

“Despite this, the policy rate remains at 12 percent, which reflects a premium of 1,050 basis points over core inflation,” he said. He further indicated that Pakistan’s business environment, encompassing the cost of doing business, ease of doing business, and access to finance, ranks among the lowest compared to competitor nations in export markets.

“Fortunately, we have seen a consistent downward trend in inflationary pressures over recent months. The only effective path toward revitalising economic growth is through robust support for industry and exports,” Sheikh concluded.