SBP cuts policy rates to 12%, sparks mixed reactions from business leaders and economists

Lowering interest rates may offer some relief to the industry, but business leaders maintain that reducing utilities' prices is crucial to stimulate expansion and drive growth.

Pakistan's central bank has announced a 100 basis points decrease in policy rates, bringing them down to 12%. Nukta spoke with business leaders and an economist to gather their views on this development.

Economist Khaqan Najeeb appreciated the declining inflation trend that has resulted in an easing of monetary policy, which he believes will spur industrial growth. However, he raised concerns over the dismal agriculture growth, stating that if this trend persists, the target of 3.5% GDP growth will be difficult to achieve.

Former President of the Lahore Chamber of Commerce and Industry, Kashif Anwar, also praised the declining interest rates, noting their contribution to industrial growth. However, he emphasized that merely decreasing the rate wouldn’t suffice to boost industry growth. He pointed out that utility prices and availability are problematic, and unless the cost of doing business is reduced, industrial expansion will not occur.

Former President of the Korangi Association of Trade and Industry, Johar Ali Qandhari, criticized the mere 100 bps rate cut, given the improved economic indicators.

He remarked that despite the policy rate being down to 12%, the cost of financing still reaches 16% to 17%. He warned that if the cost of doing business is not brought down, Pakistan’s products will become further uncompetitive in the international market.