Karachi: Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI), has expressed profound disappointment over the State Bank of Pakistan’s (SBP) decision to maintain status quo in the key policy rate, keeping it at 10.5%. The apex trade body has termed the decision as counterproductive and strictly disappointing vis-a-vis the industrial revival Pakistan desperately needs at the moment.
Atif Ikram Sheikh stated that the business community had categorically demanded a substantive reduction of 3.5% or 350 basis points to bring the policy rate down to 7% immediately.
FPCCI Chief elaborated that the SBP’s cautious approach is baffling given the ground realities – with core inflation stabilized and hovering around 5% over the past many months and major economic indicators pointing towards a need for growth; and, this decision will continue to hamper access to finance for the industry.
Atif Ikram Sheikh maintained that the industry is currently battling an existential crisis due to exorbitant energy tariffs and high borrowing costs. We needed a shock therapy of a 3.5% cut to kickstart the economy; instead, we got a status quo that will not help move the needle on the cost of doing business.
Atif Ikram Sheikh reiterated that the high cost of capital is the primary driver of industrial closures and the inability of Pakistani exporters to compete globally. They warned that if the monetary policy is not aggressively corrected in the next review to reach single digits, the target for export growth and industrial expansion for the fiscal year will remain elusive.
President FPCCI presented their demands as an immediate review of the monetary stance to align interest rates with the single-digit inflation figures; a clear roadmap from the SBP to bring the policy rate down to 7% and the declaration of an “Industrial Emergency” to save manufacturing units from shutting down due to the high cost of inputs and finance.
Saquib Fayyaz Magoon, Senior Vice President of FPCCI, highlighted the gap between the policy rate and the inflation rate. The real interest rate in Pakistan remains unsustainably high compared to our regional competitors, he added.
SVP FPCCI pointed out that, when inflation has receded, keeping the policy rate at double digits is unjustified. This decision continues to penalize the private-sector, restricts access to finance for SMEs, and hampers our export competitiveness. The SBP has missed a crucial opportunity to align monetary policy with the government’s vision for industrial growth and export facilitation, he added.
