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KARACHI, Sep 04 (APP):Karachi Chamber of Commerce and Industry (KCCI) on Wednesday urged the State Bank of Pakistan (SBP) to announce reduction in the policy rate in wake of continues decline in inflation and upgraded ratings by an international rating agency.
The Chairman Businessmen Group Zubair Motiwala and President KCCI Iftikhar Ahmed Sheikh, in a joint statement issued here, suggested that interest rate should be cut down by at least 500 basis points to bring it to 14.5 percent from the existing 19.5 percent in the next monetary policy statement as the inflation continues to descend to reach 9.6% in August whereas the Moody’s recently upgraded local and foreign currency issuer and senior unsecured debt ratings to Caa2 from Caa3.
The inflation rate, the lowest in three years, was a strong justification for a reduction in the policy rate that was desperately needed to trigger industrial and economic activities, they said adding that a reduction of at least 500 basis points in next monetary policy would be widely welcomed by the business community as it would help in providing the much-needed relief to businesses who were struggling hard due to excessively high cost of doing business.
Zubair Motiwala stated that a reduction in the policy rate would not only provide much-needed relief to the manufacturing sector but also stimulate economic growth through increased borrowing and investment in the private sector and improving country’s regional competitiveness.
He further stated that reducing the policy rate by 1 percent could save approximately Rs 467 billion in debt servicing costs, providing substantial fiscal relief and reducing the financial burden on the government.
President KCCI Iftikhar Ahmed Sheikh was of the view that significant decline in global commodity prices, including a 23.1 percent reduction in wheat prices, coupled with improved domestic agricultural output, has eased inflationary pressures.
The reduction in the policy rate will not only help stimulating economic growth but it could help rebalance credit distribution towards the private sector, he added.