Business community demands policy rate cut to single digit

The State Bank of Pakistan’s (SBP) attempt to cut 200 basis points in interest rate to facilitate the business community appeared to fail in easing commercial activities as traders want an immediate reduction to single digit to end industries’ liquidity crunch.

"The interest rate should be brought down to single digits for a long-term time," said United Business Group (UBG).

A statement issued by the UBG said the 200 bps cut is insufficient to boost the growth.

“A 200bps cut will provide slight relief to businesses. In reality, the traders, exporters, importers, and small businesses are facing severe financial challenges, primarily due to a liquidity crunch,” it stated.

The UBG added that business costs witnessed a sharp rise due to the worsened situation, which emerged from economic challenges and high-recorded energy tariffs.

The business group acknowledged that the step taken by the SBP in the current circumstances was positive, but it remained insufficient for growth.

While expressing the need for a sustainable monetary policy, they demanded a 300 bps cut to improve the worsening situation and a gradual reduction to bring interest rates down to single digits.

However, Pakistan Business Council (PBC) CEO Ehsan Malik appreciated the Monetary Policy Committee’s decision to adopt a cautious approach by limiting the cut to 200bps.

On September 12, the central bank announced to cut the policy rate by 200 bps to 17.5 percent from 19.5 percent.