The Islamabad Chamber of Commerce & Industry (ICCI) has expressed disappointment over keeping the interest rate at 7 percent unchanged by the State Bank of Pakistan (SBP) and demanded that it should have been brought down to 3 percent in order to stimulate the businesses and investment in the country.
Chairing a meeting, ICCI President Sardar Yasir Ilyas Khan said that to enable the businesses to combat the impact of Covid-19 pandemic, the governments around the world has made drastic cuts in the policy rate and the business community in Pakistan had also been demanding the same to ease the problems of businesses, but it is unfortunate that the SBP has not given due consideration to their demand and maintained it at 7 percent in its latest monetary policy review, said a statement issued on Saturday.
He said that the policy interest rate in Japan is -0.1 percent, Euro Area, zero percent, US and Canada, 0.25 percent, UK and Australia, 0.1 percent, Malaysia, 1.75 percent, Philippines, 2 percent, Indonesia, 3.5 percent, China, 3.85 percent, and India, 4 percent, but it is still 7 percent in Pakistan, which is very high compared to the regional and other countries.
He further said that the average policy interest rate in Pakistan remained 11.08 percent from 1992 to 2021, which showed that Pakistan tended to keep borrowing costs for businesses and investors quite high, which is not a supportive approach for growth of the economy.
The ICCI president said that the high interest rate always tends to reduce the economic growth as it increases the borrowing cost for businesses, reduces the disposable income and limits the purchasing power of consumers, which ultimately leads to further contraction in the business activities.
Therefore, in the prevailing circumstances when the businesses are struggling for survival due to the restrictions of Covid-19 pandemic, it is the most opportune time that the SBP should have reduced the policy interest rate to bring it down to at least 3 percent in order to provide cheap credit to businesses and investors.
He emphasised that the SBP should revise its monetary policy and reduce policy interest rate to 3 percent before the close of this fiscal year that would help in promoting SMEs and reviving the growth of business and industrial activities in the country. —TLTP