FPCCI calls for 500-point rate cut to spur economic revival

KARACHI: Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh has expressed the business community’s disappointment with the current monetary policy, which continues to maintain a substantial premium over core inflation.

According to government data, inflation stood at 6.9 per cent in September 2024, while the policy rate remains at 17.5 per cent -- reflecting a 1060-basis-point (bps) premium.

After consulting industry leaders, the FPCCI is calling for an immediate 500bps rate cut in the upcoming monetary policy committee (MPC) meeting on Monday. Sheikh said that this adjustment is necessary to align monetary policy with the vision of the Special Investment Facilitation Council (SIFC) and the prime minister’s goals for economic growth and exports. Core inflation is anticipated to remain near 7.0 per cent for October 2024, he noted.

Sheikh highlighted that international oil prices are expected to remain low, with Saudi Arabia projected to reduce crude prices for Asia in December. Given that oil prices are a major driver of inflationary pressures in Pakistan, the conditions are ripe for a significant rate cut, he argued, urging authorities to abandon contractionary monetary practices.

Reaffirming the FPCCI’s position, Sheikh said that Pakistan’s business climate, ease of doing business, and access to finance are lagging behind those of regional competitors. He added that the ongoing downward trend in inflation calls for supportive measures to revitalise industrial growth and boost exports.

FPCCI Senior Vice President Saquib Fayyaz Magoon further proposed an immediate reduction in the interest rate to 12.5 per cent to make Pakistani exports more competitive globally by lowering capital costs. He urged the government to fulfil its commitment to rationalise electricity tariffs for industry and renegotiate power purchase agreements with independent power producers (IPPs) to a take-and-pay model, which would relieve industries and consumers of capacity charges in their electricity bills.