Karachi, November 1 2024: In a bold call to action, Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has expressed deep dissatisfaction with the current monetary policy framework, urging a significant revision ahead of the upcoming Monetary Policy Committee (MPC) meeting. Sheikh highlighted that the prevailing policy rate of 17.5 per cent stands in stark contrast to the government-reported inflation rate of 6.9 per cent for September 2024, creating an alarming premium of 1060 basis points.
Sheikh stated, “The business, industry, and trade community are disappointed with a monetary policy that continues to impose an excessive burden on economic growth. After thorough discussions across various sectors, FPCCI demands a single-stroke cut of 500 basis points in the upcoming MPC meeting to rationalize the policy and align it with the Prime Minister’s vision for economic growth and the objectives of the Special Investment Facilitation Council (SIFC).”
He further noted that core inflation is anticipated to hover around 7 per cent for October 2024, indicating a pressing need for adjustment. Sheikh pointed to favourable global trends, including expected reductions in international oil prices, particularly with Saudi Arabia’s planned cuts in crude prices for Asia come December. Given that oil prices are a key driver of inflationary pressures in Pakistan, the time is ripe for substantial policy changes.
“Authorities have all the prerequisites to announce a meaningful rate cut and move away from regressive and contractionary monetary policies,” he asserted, emphasizing that the current climate necessitates a supportive approach towards industry and exports.
Sheikh reiterated the FPCCI’s concerns regarding the cost of doing business, ease of access to finance, and overall competitiveness in export markets. He stated, “Pakistan’s business environment is less favourable compared to its competitors, and the only viable solution to restore economic growth is to bolster support for industry and exports.”
Supporting Sheikh’s call, Saquib Fayyaz Magoon, Senior Vice President of FPCCI, proposed that the interest rate be lowered to 12.5 per cent immediately. This reduction, he argued, would enable Pakistani exporters to better compete in both regional and international markets by significantly lowering the cost of capital. Magoon stressed that this move should coincide with the government’s commitment to rationalize electricity tariffs for industries and renegotiate power purchase agreements with independent power producers (IPPs) to eliminate capacity charges for consumers.
FPCCI has consistently called for greater transparency and consultation in economic policymaking, representing the interests of the business community. Sheikh emphasized the need for the government to provide clear answers to two critical questions: first, what measures are being taken to ensure the continuity of the new IMF program and how will they impact the cost of doing business? Second, what specific actions will be taken to steer Pakistan back onto a growth trajectory, and when will the business community be involved in these discussions?
As the MPC meeting approaches, the business community is keenly awaiting a responsive and responsible monetary policy that fosters a conducive environment for growth and competitiveness in Pakistan.
