President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) AtifIkram Sheikh, has expressed profound disappointment with the central bank’s latest monetary policy decision. Despite a 200 basis points (2 percent) rate cut, Sheikh argues that the reduction falls short of addressing the ongoing economic challenges. Sheikh highlighted that core inflation in Pakistan reached 9.6 percent in August 2024, according to data from the Pakistan Bureau of Statistics (PBS). The FPCCI president criticized the real interest rate, which remains over 790 basis points higher than the core inflation rate even after the recent cut.
He described this as detrimental to business and economic growth. Sheikh pointed out that core inflation is projected to hover around 8.0 percent for September 2024, and international oil prices have recently dropped to a three-year low of under USD 70 per barrel. Given these factors, Sheikh believes that the authorities had an opportunity to implement a more substantial rate cut but opted instead to maintain what he views as outdated and restrictive monetary policies.
The FPCCI President underscored the dire state of Pakistan’s business environment, noting that the cost and ease of doing business, as well as access to finance, are at a competitive disadvantage compared to other export markets. He argued that a more aggressive approach is necessary to stimulate economic growth and support the industrial and export sectors. Sheikh called for an immediate reduction in the interest rate to 12 percent, which he believes would provide much-needed relief to Pakistani exporters by lowering the cost of capital.
Additionally, he urged the government to follow through on promises to rationalize electricity tariffs for industry and renegotiate power purchase agreements with independent power producers (IPPs) to further support economic recovery.
