Pakistan business community welcomed the State Bank of Pakistan’s (SBP) decision to cut the key policy rate by 200 basis points (bps) on Monday, but termed it “insufficient” and sought that the central bank bring the rate down to single digit to “accelerate business and economic activities” in the country.

In its latest Monetary Policy Statement issued on Monday, the SBP revised down the benchmark policy rate to a two-and-half-year low at 13%. The central bank has cumulatively reduced the rate by 900 basis points in the past six months.

How the key interest rate has moved since July 2022

However, the business community expressed its dissatisfaction over the SBP’s decision which was against their demand for 400-500bps reduction in the key policy rate.

In a statement, Federation of Pakistan Chambers of Commerce & Industry (FPCCI) termed the SBP decision to reduce its key policy rate by 200bps “insufficient”.

FPCCI president Atif Ikram Sheikh demanded the central bank to “immediately bring the rate down to single digit to accelerate business and economic activities in the country”, according to the FPCCI statement.

“The improvement in business activities would pave way for increase in exports,” he was quoted as saying.

Karachi Chamber of Commerce and Industry (KCCI) president Muhammad Jawed Bilwani said the policy rate at 13% was “still too high”.

“The rate should be at an ideal level at 5-7% in line with many other countries in the region and around the world. Policy rates in India, Vietnam, and Bangladesh… stand at 6.5%, 4.5% and 10% respectively,” KCCI statement read.

“The continuation of a tight monetary policy has led to exceptionally high borrowing costs, causing substantial harm to the economy, particularly affecting the manufacturing sector,” KCCI president was quoted as saying in the statement.

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Pakistan Vanaspati Manufacturers Association (PVMA) chairman Sheikh Umer Rehan welcomed the SBP’s decision with hopes that the central bank would bring the policy rate down the into single digit in the next monetary policy statement likely in late January or early February 2025.

He said the cumulatively cut of 9 percentage points in the policy rate had helped activate some industries and stimulate investment activities.

“The ghee and cooking oil manufacturers have started making new investment to expend production lines. Textile (the single largest export earning sector) is hoped to be a big investor as well,” Rehan said.