Karachi Chamber of Commerce and Industry (KCCI) president Muhammad Jawed Bilwani today expressed disappointment over the State Bank of Pakistan’s (SBP) decision to reduce the key interest rate by 200 basis points to 13 percent, terming it insufficient in light of the significant decline in inflation.

In a statement, Mr Bilwani noted that the business community had called for a more substantial reduction of 400 to 500 basis points to align with the declining inflation, which fell to 4.9 percent in November. ‘The reduction to 13 percent is still too high. To stimulate economic activity, the rate must be slashed more aggressively, ideally to a range of 5 to 7 percent, comparable to countries in the region,’ he said, citing interest rates in India (6.5pc), Vietnam (4.5pc), and Bangladesh (10pc).

The KCCI leader stressed the importance of a single-digit interest rate, arguing that it would encourage borrowing, reduce the cost of doing business, and drive economic expansion. While acknowledging the SBP’s efforts to gradually ease monetary policy-bringing the rate down from 22pc to 13pc over the past five cuts-Mr. Bilwani maintained that the pace of reductions was inadequate to address the challenges faced by businesses.

‘The high borrowing costs resulting from the tight monetary policy have hurt the economy, particularly the manufacturing sector,’ he observed. ‘A further cut of at least 500 basis points in the next policy review is necessary to provide relief to businesses and consumers.’

He further stated that the decline in inflation could not solely be attributed to monetary tightening but was also influenced by falling global commodity and oil prices, government administrative measures, and improved agricultural production.

Mr Bilwani called for decisive action, stating that a lower interest rate would not only ease the financial burden on businesses but also help Pakistan remain competitive in the region. ‘We hope the central bank will continue to bring the policy rate down to a level that supports economic growth,’ he concluded.

The business community awaits the SBP’s next monetary policy review, hopeful for measures that address their longstanding concerns and foster a conducive environment for investment and growth.