(July 30, 2024)
The chairman of the FPCCI Advisory Board and National Business Group Pakistan, President of Pakistan Businessmen and Intellectuals Forum, and All Karachi Industrial Alliance, as well as former provincial minister Mian Zahid Hussain, on Tuesday, lauded the SBP for a slight reduction of one per cent in the interest rates.
Staff level agreement with the International Monetary Fund, control over imports, increase in taxes, reduction in current account deficit, stabilization of rupee value and reduction in inflation have boosted the central bank’s confidence on which it has cut the key policy rate, he said.
Talking to the business community, the veteran business leader said that the central bank’s decision will increase the confidence of the business community to some extent.
However, he said, keeping in mind the reduction in inflation, which has come down from 35% to 12%, a three to four percent reduction in interest rates was needed to meet challenges as industry and business are facing worst conditions.
Mian Zahid Hussain said that not only are electricity and gas more expensive in Pakistan than in the countries of the region, but the interest rate is also much higher than in these countries.
He said that the Monetary Policy Committee of the State Bank of Pakistan has reduced the basic policy rate by 100 basis points to 19.5% due to the trend of decreasing inflation. This decrease will lead to some reduction in interest payments on loans.
Mian Zahid Hussain said that the external accounts are continuing to improve, and the foreign exchange reserves of the State Bank are also increasing, which is why efforts have been made to provide some support to the economic activities.
He said that it would have been better if the interest rate had been reduced by four percent because the business community has endured high interest rates for many years and is currently facing many challenges.
The business leader said that while trying to control inflation, the central bank should also consider increasing business activities so that the public can get some relief.
The government also needs to address the fundamental weaknesses in the system through reforms to restore the confidence of the business community and foreign investors, as more than central bank measures are required.
Mian Zahid Hussain further said that earlier in the meeting held on June 10, the State Bank decided to reduce the interest rate by 150 basis points, after which it had come down to 20.5%. This was the first cut in the interest rate, while the second cut was made yesterday.
The business community wants the government and the central bank to work together to improve the economy so that the growth rate can increase, he said.
