KARACHI (Dunya News) – United Business Group (UBG) Patron-in-Chief SM Tanveer has urged the State Bank of Pakistan (SBP) to reduce the interest rate to 6 percent, citing the country’s low Consumer Price Index (CPI) of 0.3% and an average inflation rate currently at 4%.
In a statement issued on Thursday, he noted that the International Monetary Fund (IMF) also advises maintaining interest rates that are positive in real terms, relative to inflation.
Tanveer emphasised that Pakistan’s current interest rate of 11 percent is excessively high, especially when inflation is just around 4 percent. With the monetary policy announcement scheduled for July 30, he called on the SBP to lower the interest rate to help stimulate economic growth.
He highlighted that the government has allocated Rs8.5 trillion toward interest payments, and reducing the interest rate to 6 percent could potentially save around Rs3.5 trillion. This cut, he argued, would positively impact the economy—particularly industries burdened by high borrowing costs and electricity tariffs. Lower interest rates would also enhance the global competitiveness of Pakistani exports, especially since interest rates in many international markets range between 4 percent and 5 percent.
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However, Tanveer expressed concern over recent budget measures, particularly Sections 37A and 37B, which grant powers of arrest and detention. He warned that such provisions would further hinder business growth.
He called for a more business-friendly environment and urged the government to reconsider these measures, focusing instead on policies that encourage investment, growth, and global competitiveness.
It is worth noting that the SBP has recently maintained the policy rate at 11 percent, citing inflation and external sector risks. However, with inflation projected to stabilise near the long-term average of 7 percent in the coming quarters, a rate cut could prove beneficial.
The current account outlook has also improved due to increased remittances, and foreign exchange reserves are expected to surpass $13 billion by June 2025.