KARACHI: Business leaders have called on the State Bank of Pakistan (SBP) to slash the policy rate to 5-6pc in the upcoming Monetary Policy Committee (MPC) meeting to bring it in line with regional economies and ease the mounting cost of doing business in the country.

President of the Karachi Chamber of Commerce and Industry (KCCI), Muhammad Jawed Bilwani, said that borrowing costs in Pakistan are among the highest stifling business growth. He noted that interest rates in Vietnam stand at 6.3pc, followed by Cambodia at 3pc, Indonesia at 6pc, and India at 5.5pc.

He added that Pakistan’s competitiveness is further eroded by steep energy costs, with electricity tariffs hovering around 16 cents per unit compared to 9 cents in Bangladesh, 8 cents in Vietnam, 10 cents in Cambodia and Indonesia, 7.2 cents in India, and just 5 cents in Sri Lanka.

A reduction in interest rates to 5-6pc would provide vital relief to businesses, particularly small and medium-sized enterprises (SMEs), which are disproportionately burdened by high financing costs, he said.

Bilwani also highlighted that over 75pc of domestic credit is consumed by government borrowing, leaving less than 25pc for the private sector. “This imbalance must be addressed through proactive monetary policy,” he added.

Industrialists call for sharp cut in SBP policy rate

He warned that Pakistan remains uncompetitive not only due to high interest rates but also because of elevated electricity, gas, and water tariffs, steep taxation, and one of the highest minimum wages in the region — all while labour productivity remains low. “These elements must be rationalised to lower the cost of doing business,” he said.

Korangi Association of Trade and Industry President Junaid Naqi, echoed the demand, pointing out that with inflation dropping to 3.2pc in June and the current policy rate at 11pc, there is no economic rationale for maintaining such a high interest rate.

“Industries are operating below capacity, new investments are stalled, and business confidence is at a low,” he said. “Persisting with outdated monetary policies will only worsen unemployment, depress investment, and cause revenue shortfalls.”

Vice presidents of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Amaan Pracha and Asif Sakhi, along with Faisal Moiz Khan of the North Karachi Association of Trade and Industry and Sheikh Mohammad Tahseen of the Federal B Area Association of Trade and Industry, also jointly urged the central bank to bring interest rates down to single digits to spur industrial expansion.

They noted that easing interest rates would reduce pressures on manufacturers and help restore economic momentum.President of the United Business Group (UBG), Zubair Tufail, also called for a 4-5pc reduction in the policy rate, arguing that monetary easing is essential for economic revival.

Offering a differing view, Lasbela Chamber of Commerce and Industry President Yakoob H. Karim urged an immediate rate cut from 11pc to 9pc in the July 30 meeting, with a target of 5pc by end-2025 to support long-term economic growth.

Published in Dawn, July 26th, 2025