KARACHI, November 05 2024: The President of the Hub Chamber of Commerce and Industry, Mr. Yakoob H. Karim, has expressed his approval of the State Bank of Pakistan’s recent decision to reduce the interest rate by 2.5% (250 basis points). However, he emphasized that while this move is a step in the right direction, it remains insufficient to stimulate economic activity, particularly in the face of the prevailing inflation rate of 7%.
In a statement issued on Friday, Karim reiterated the long-standing demand of the business community for a more aggressive interest rate reduction. He called for an immediate 4% cut in the benchmark rate, followed by further reductions to bring the interest rate down to 9% by June 2025.
According to Karim, the government’s aim of controlling inflation cannot be achieved without substantial support for the business and industrial sectors. He argued that the only way to bring down inflation in the long term is to incentivize businesses to expand trade, production, and industry, which in turn would create much-needed employment opportunities.
He pointed out that the current high interest rates, despite the recent reduction by the State Bank, remain a major deterrent to investment. With the mark-up rate still at 15%, Karim believes that it is extremely difficult for businesses to secure affordable financing for expansion. He stressed that controlling inflation is simply not possible without stimulating industrial growth and boosting business confidence.
“With the mark-up rate at 15%, even after the recent reduction, it remains too high to support the growth of trade and industry,” Karim said. “The proposed reduction in interest rates is a necessary first step, but it must be followed by further, more substantial cuts to create a conducive environment for investments and economic growth.”
He urged the Government of Pakistan and the State Bank of Pakistan’s Monetary Policy Committee to seriously consider the needs of the business community in crafting policies that will encourage industrial expansion and economic development. Karim stressed that only through rapid industrial growth and enhanced business activity can the nation achieve its goal of reducing inflation and fostering long-term economic stability.
In conclusion, Karim called for a more robust policy response that would not only address inflation in the short term but also lay the foundation for sustainable economic growth and job creation across the country.
