KCCI criticizes SBP’s modest interest rate cut

December 16, 2024 (MLN): The President of the Karachi Chamber of Commerce and Industry (KCCI), Muhammad Jawed Bilwani has expressed disappointment over the State Bank of Pakistan's (SBP) decision to reduce the policy rate by 2%, bringing it down to 13%

Commenting on the Monetary Policy Committee’s (MPC) announcement, Bilwani stated that the reduction falls far short of the business community’s demands for a cut of at least 400 to 500 basis points.

He emphasized that the modest reduction does not align with the recent downward trend in inflation, which declined sharply to 4.9% in November.
 
President Bilwani emphasized that the business community wants to see interest rates dropping to single digits, as this would encourage borrowing and promote business expansion by lowering the cost of doing business, ultimately benefiting the economy.

He acknowledged the State Bank of Pakistan for continuing to ease its monetary policy, noting that this was the fifth consecutive cut, reducing the interest rate from 22% to 13%.

However, he urged for a more significant reduction to stimulate economic growth and alleviate the financial burden on businesses and consumers.

He pointed out that the tight monetary policy implemented by the State Bank of Pakistan (SBP) had led to exceptionally high borrowing costs, causing substantial harm to the economy, particularly affecting the manufacturing sector.

Therefore, a significant cut has become necessary. “We hope that the declining trend in the interest rate continues, with SBP reducing the policy rate by at least 500 basis points in its next review,” he added.

Bilwani noted that while inflation has decreased to single digits, this was not primarily due to the SBP’s tight monetary policy, but rather due to the global declining trend in commodities prices as well as international oil prices along with administrative measures taken by the government and improved agricultural production.

Jawed Bilwani expressed hope for further reductions in the interest rate, which would be welcomed by the entire business community, as they have been adversely affected by the excessively high cost of doing business.

Copyright Mettis Link News