KARACHI: Atif Ikram Sheikh, President Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has unequivocally demanded that the key policy rate should be cut down to 9 percent to reflect the ground realities and economic indicators of Pakistan as CPI has clocked at 6.9 percent in September 2024 – which is a 44-month low.
There will still be 200 basis points (bps) premium at 9 percent policy rate; which is a safe buffer for any monetary policy which is looking at inflation in the single digits, he added.
Atif Ikram Sheikh demanded that an emergent meeting of monetary policy committee (MPC) of the State Bank of Pakistan should be called; and, a decision should be taken on the overdue reduction in key policy rate.
The next scheduled MPC meeting is on 4th November, which will be too late to pass on the relief. We have an opportunity to curtail cost of doing business substantially through making access to finance possible on rational rates, he added.
FPCCI President explained that the economy has cooled down over the last 16 months; from 38 percent inflation in May 2023 to 6.9 percent in September 2024 – it is a staggering 6 times reduction; nevertheless, the policy rate has dropped only by 450 bps from 22 percent to 17.5 percent. It is the biggest contradiction of policymaking and economic governance in Pakistan, he added.
Sheikh elaborated that the government of Pakistan will be the biggest beneficiary of the reduction in interest rate as 1 percent reduction in interest rate translates into approximately PKR 476 billion reduction in debt burden; and, bringing interest rate in single digits will free up government’s resources for development or infrastructure projects; financing budget deficit through indigenous resources and spending on welfare of people – health, education, poverty alleviation and law & order.
FPCCI Chief proposed that the country needs renewed and effective temporary economic relief facility (TERF); export finance scheme (EFS) and long-term financing facility (LTFF) to boost economic activities, investments, industrialization and exports.
Sheikh maintained that the business community of Pakistan and the common man have been under severe economic strains for the past many years; nonetheless, now the room has been made available to provide relief through pro-growth and pro-business measures.
Atif Ikram Sheikh noted that the inflation is going down across the board; i.e., headline national, sectoral level, wholesale and urban or rural areas as well. We are not asking government for any favour or waivers here; we are just asking them to align monetary policy with government’s own inflation numbers as per Pakistan Bureau of Statistics. Additionally, bringing key policy rate down to 9 percent will not contradict or hamper Pakistan’s ongoing 3-year IMF extended finance facility (IMF-EFF) program.
Copyright Business Recorder, 2024