KARACHI: President Karachi Chamber of Commerce and Industry (KCCI) Muhammad Jawed Bilwani, while referring to the drastic decline of 4.86 percent in inflation as of November 2024 which was the lowest in recent years, urged the State Bank of Pakistan (SBP) to reduce the policy rate by 400 basis points which would not only align real interest rates closer to sustainable levels but also make borrowing affordable for businesses and consumers.

KCCI President opined that a reduction in interest rates acts as a catalyst for economic activity, fostering growth, enhancing competitiveness, and improving the overall business environment.

This aligns with global best practices where central banks use rate adjustments to stimulate economic growth during periods of low inflation, he added.

He noted that the drop in inflation in November marked the fourth consecutive month of single-digit inflation after over two years of high inflationary pressures. “In response, the MPC-SBP has reduced the policy rate from 20.5 percent to 15 percent since the beginning of the current fiscal year, yet the current rate remains relatively high compared to regional peers such as India (6.5 percent), Vietnam (4.5 percent), and Bangladesh (10 percent)”, he said, adding that high interest rate continues to suppress private sector credit growth and stifles economic activity, placing Pakistan at a competitive disadvantage.

He also mentioned that when inflation was last recorded at 5.65 percent in January 2021, the policy rate was just 7 percent, underscoring the need for a more harmonized and responsive monetary policy.

Copyright Business Recorder, 2024