KARACHI: Leaders of United Business Group (UBG) have criticised the State Bank’s mere 2% reduction in the interest rate and demanded more 3% cut.
They also emphasised that the interest rate should be brought down to single digits and a long-term, sustainable monetary policy should be established.
The UBG leaders said that while a 2% cut in the interest rate will provide slight relief to businesses, in reality, traders, exporters, importers, and small businesses are facing severe financial challenges, primarily due to a liquidity crunch.
This situation has been worsened by economic challenges, particularly the sharp rise in business costs and record-high energy tariffs. Although the 2% reduction is a positive step by the SBP in the current circumstances, it remains insufficient.
The UBG leaders noted that the business community of Pakistan had expected a significant 5% reduction in the interest rate, but the 2% cut neither meets expectations nor aligns with the decreasing inflation rate. Inflation has already dropped to single digits, yet the policy rate remains excessively high.
UBG President Zubair Tufail termed the 2% cut as inconsistent with the facts, stating that the business, industrial, and trading communities across Pakistan are disappointed with the monetary policy, as it continues to carry a heavy premium over core inflation.
According to market estimates, core inflation for September 2024 is expected to hover around 8%, while global oil prices have fallen to a three-year low and dropped below $ 70 per barrel this week. Therefore, the SBP had no compelling reason not to announce a substantial cut in the interest rate.
The interest rate should have been immediately brought down to 12% to meaningfully reduce the cost of capital for Pakistani exporters and allow them to compete in regional and international markets.
However, it is not too late, and the SBP should immediately announce a further cut of at least 3% in the interest rate.
Key leaders included Chairman of Sindh Region Khalid Tawab, and Secretary General Hanif Gohar, along with central leaders Syed Mazhar Ali Nasir, Momin Ali Malik, Malik Khuda Bakhsh, Nadim Kushtiwala and others.
Copyright Business Recorder, 2024