KARACHI: Acting President Karachi Chamber of Commerce & Industry (KCCI) Altaf A. Ghaffar, while commenting State Bank’s decision to reduce the interest rate by 2 percent to 17.5 percent, stated today that although KCCI was expecting substantial reduction in interest rate by at least 5 percent but it has been reduced by 2 percent only which neither enough nor in line with the declining trend in inflation which has come down to single digit.

“With a reduction of 200 basis points, the key policy rate now stands at 17.5 percent which was still too high, hence, it must be reduced more aggressively to quickly go down to single digit at somewhere around 7 to 8 percent at par with many other countries in the region and around the world”, he added in a statement issued here on Thursday. Acting President KCCI said that the business community wants to see interest rate down to single digital which would definitely encourage borrowings and promote expansion due to reduced cost of doing business, proving favourable for the economy.

It is encouraging to see that the State Bank of Pakistan has continued to ease monetary policy stance as this was the third consecutive cut which brought the interest rate down from 22 percent to 17.5 percent but it needs to be aggressively brought down to stimulate economic growth and ease financial burden on businesses and consumers, he added. He stated that that it was a well-known fact that tight monetary policy stance by SBP that led to unprecedently expensive borrowing caused too much loss to the economy, particularly the cost of doing business, which has grossly suppressed the manufacturing sector, hence, relief in the form of substantial cut has become inevitable.

“We appreciate third consecutive reduction in interest rate and hope that the trend continues with SBP reducing policy rate by at least 500 basis points in its next review”, he added. Although the inflation has drastically come down to single digit now but in Pakistan’s case, it was not because of SBP’s tight monetary policy stance but due to administrative measures taken by the government along with improved agricultural production, he opined while referring to excellent agricultural production. “Stability in rupee value is also one of the major reasons for easing the inflation as it is a well-known fact that huge quantities of commodities were regularly being imported in Pakistan, hence, devaluation of rupee directly triggers the inflation”, he added.

Altaf Ghaffar hoped to see further reduction in interest rate which would be widely welcomed by the entire business community of the country that has been badly hit due to exorbitantly high cost of doing business.