UBG Chief urges SBP to cut interest rate to 6pc
S M Tanveer, Patron-in-Chief of the United Business Group (UBG), has called on the State Bank of Pakistan (SBP) to reduce the policy interest rate to 6 per cent, citing low inflation and the need to spur economic growth.
In a statement issued on Thursday, Tanveer said the prevailing interest rate of 11pc is disproportionately high, especially given that the Consumer Price Index (CPI) stands at 0.3pc while average inflation is currently hovering around 4pc.
He noted that the International Monetary Fund (IMF) recommends maintaining interest rates slightly above the inflation rate to keep them positive in real terms. "At 11pc, Pakistan's interest rate is far above the inflation rate, stifling industrial growth and increasing the cost of doing business," he said.
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With the monetary policy announcement due on July 30, Tanveer urged the central bank to consider a significant rate cut. He argued that such a move would reduce the government's interest payments, stimulate investment, and make Pakistani exports more competitive.
He pointed out that the government has allocated Rs8.5 trillion for interest payments in the current budget. A cut in the interest rate to 6pc, he claimed, could save nearly Rs3.5 trillion.
Highlighting the challenges faced by the business community, Tanveer also criticised certain fiscal measures in the recent budget. In particular, he expressed concern over Sections 37A and 37B of the Income Tax Ordinance, which grant tax authorities the power to arrest and detain.
He urged the government to focus on creating a business-friendly environment, noting that high borrowing costs, coupled with soaring energy prices, are already weighing heavily on industry.
Also Read: PM Shehbaz hails World Bank position on IWT
Meanwhile, the SBP has maintained its policy rate at 11pc in recent months, citing inflationary pressures and vulnerabilities in the external sector. However, with inflation expected to stabilise around the long-term average of 7pc in the coming quarters, analysts believe there may be room for a cautious easing of monetary policy.
The external account outlook has improved, buoyed by strong inflows of workers' remittances, and foreign exchange reserves are projected to rise beyond $13 billion by June 2025 — developments that may provide the SBP with greater policy flexibility.
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