Cut in interest rate: PBF describes SBP decision positive step for businessmen

KARACHI: The President of the Pakistan Business Forum (PBF), Khawaja Mehboob ur Rehman has expressed his approval of the recent one percent reduction in interest rate, calling it a positive step for the country’s business community.

Rehman emphasised that the continuous reduction in interest rate is providing much-needed relief to businesses, which have been struggling with high financing costs amid economic challenges.

Khawaja Mehboob ur Rehman noted that while the reduction in interest rate is a welcome move, it is only one part of the solution. He stressed that the government must now turn its focus to the escalating cost of electricity, which remains a major burden on businesses across Pakistan.

“The reduction in interest rate is undoubtedly a step in the right direction,” he said. “However, the benefit of this reduction will not fully reach the industry unless electricity prices are also brought down. High energy costs continue to erode the competitiveness of local industries, and the government must address this issue urgently.”

Rehman further highlighted that at present, the combination of high taxes and soaring electricity bills is directly contradicting the vision of the prime minister, who has called for policies that support economic growth and ease the burden on businesses. According to the PBF president, these financial pressures are preventing the business community from fully benefiting from the recent interest rate cut, as businesses are forced to allocate substantial resources to cover energy costs and taxes.

“The current tax structure and energy pricing are not in line with the prime minister’s vision of a business-friendly environment,” Rehman added. “Until these issues are addressed, businesses will continue to face significant challenges, and the intended benefits of lower interest rate will remain limited.”

In addition to addressing domestic economic challenges, the PBF president also underscored the importance of engaging with the International Monetary Fund (IMF) to ensure the stability and sustainability of Pakistan’s economy. He pointed out that while the government has made strides in managing fiscal issues, further collaboration with international financial institutions like the IMF is essential to ensure that the economy remains on a stable growth path.

“To keep the economy on track, the IMF must be engaged constructively,” said Rehman.

“While the country has made progress, there is still a need for broader international support and a sustainable economic framework. If we are to build long-term stability and growth, it’s crucial that we maintain a strong relationship with the IMF and other international partners.”

The Pakistan Business Forum’s remarks reflect growing concerns within the business community about the current economic environment. While the interest rate cuts have been hailed as a positive development, industry leaders believe that addressing structural issues such as high energy costs and the tax regime is critical to ensuring sustainable economic growth and creating a conducive environment for businesses to thrive.

The PBF’s call for a comprehensive policy shift, including a reduction in electricity prices and reforms to the tax system, is likely to gain traction among business groups who are seeking immediate relief from the ongoing financial pressures.

Salim Vali Muhammad, Chairman of the Pakistan Chemicals & Dyes Merchants Association (PCDMA), has rejected the State Bank of Pakistan’s one percent reduction in the interest rate, calling it insufficient. He raised the question that despite the ongoing decrease in inflation, the failure to bring the interest rate to single digits is creating serious concerns.

He said, “When inflation is coming down, why isn’t the central bank making a significant reduction in the interest rate? Only one percent reduction will not provide any significant benefit to the economy. Until the policy rate comes to single digits, it will be difficult for economic activities to recover.”

Salim Vali Muhammad added that while Prime Minister Shahbaz Sharif has repeatedly expressed a desire for a significant reduction in the interest rate, the State Bank continues to refrain from making such a reduction, which is not conducive for the economy. The country will only stay on the path of progress if proper economic recovery measures are taken.

The PCDMA president called on the State Bank of Pakistan’s Monetary Policy Committee to consider the ground realities of decreasing inflation and bring the interest rate to single digits in the next monetary policy so that the country can benefit from it.

Copyright Business Recorder, 2025