Industrialists decry MPC decision to keep rate on hold

Express Tribune

10-03-2025

Reacting to the State Bank of Pakistan (SBP)'s Monetary Policy Committee (MPC) decision on Monday to keep the interest rate unchanged, industrialists expressed disappointment. They said that to turbocharge economic growth, the SBP should have reduced the interest rate to 6% in one go.
Site Superhighway Association of Industries President Masood Pervaiz said it is unfortunate that the interest rate was not cut. He noted that the industry is already struggling to survive, and further downsizing is expected after Eidul Fitr. He stressed that a 4% rate cut is essential to stimulate economic growth and investment, especially as inflation is on a downward trend, as claimed by the government and reflected in its economic figures. A balanced reduction would ensure that liquidity flows into productive sectors like industry and exports rather than speculative markets. Supporting businesses with affordable financing would drive expansion, job creation, and overall economic activity while maintaining macroeconomic stability.
SITE Association of Industry (SAI) Karachi President Ahmed Azim Alvi also termed the SBP's decision to maintain the policy rate at 12% as disappointing. He urged the SBP to support the government's efforts to promote industries and contribute to the realisation of Prime Minister Shehbaz Sharif's vision. He called on the central bank to gradually reduce the policy rate to a single-digit level so that loans could be accessed at lower rates, enabling faster economic activity.
He said the business community had expected a reduction of at least 2%, given the gradual decrease in inflation, but this did not happen, causing concern. He pointed out that the steady decline in inflation and signs of economic improvement should have been considered by the SBP.
"The business community has consistently demanded that the interest rate be brought down to single digits, but the MPC does not seem to take our demands seriously," he said. He added that industrial growth is crucial for the country's development and that easy access to loans on favourable terms could set Pakistan on a path to progress.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh expressed disappointment over the monetary policy, stating that it continues to impose a heavy premium compared to core inflation. He pointed out that, according to the government's own statistics, inflation stood at 1.5% in February 2024, while the policy rate remains at 12%, reflecting a premium of 1,050 basis points.
The FPCCI noted that core inflation is expected to remain between 1% and 3% from March to April 2025 and throughout the rest of the fiscal year. Therefore, Sheikh demanded that the key policy rate be reduced to 3%–4% by the end of FY25.
He added that international oil prices are expected to remain stable, which is a major factor in inflationary pressures. With sufficient oil supply in international and regional markets, along with spare capacity in OPEC+ countries, oil prices are expected to remain in the lower $70s per barrel in the coming months. Expressing concerns over the SBP's stance, business leader Ahmed Chinoy said the MPC's decision to keep the policy rate unchanged suggests a cautious approach, likely aimed at balancing inflation control with economic growth.
Pakistan Chemicals & Dyes Merchants Association (PCDMA) Chairman Salim Valimuhammad also rejected the SBP's decision to maintain the interest rate at 12% and demanded a significant reduction. He argued that the SBP's actions contradict ground realities, as economic conditions are improving and inflation is decreasing, yet no substantial rate cut has been made.
He urged the government to ensure loans at lower interest rates to promote business and formulate policies that would expedite commercial activities.