Business

SBP should reduce interest rate to 6% in upcoming monetary policy: S. M. Tanveer

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Staff Reporter

12 months ago

ISLAMABAD: Mr. S.M. Tanveer, Patron-in-Chief UBG, a prominent businessman man opined that the State Bank of Pakistan (SBP) must decrease the interest rate to 6% because the CPI index of the country is 0.3%, and the average inflation is 4% currently.

He added that the International Monetary Fund (IMF) also suggests maintaining positive interest rates compared to inflation.

In his opinion, the prevailing interest rate in Pakistan, which is 11%, is very high given that the inflation rate is approximately 4%. With the State Bank of Pakistan set to announce the monetary policy on July 30, he has called for the State Bank to cut the interest rate so as to drive economic growth.

Tanveer indicated that the government has recorded Rs8.5 trillion under the head of bank interest rate, and lowering the interest rate to 6% would save around Rs3.5 trillion.

This will benefit the economy, especially the industries that face high interest rates and the cost of electricity. Pakistani exports will also become competitive in the international market, as international markets have interest rates between 4-5%.

But, he added, the latest budget measures, sections 37A and 37B, empowering officers with the power of arrest and detention, will also stifle business growth.

Mr. Tanveer stressed the call for a business-friendly environment, exhorting the government to review these measures and work towards establishing conditions that would usher in growth, investment, and competitiveness.
It can be observed that the State Bank of Pakistan has kept the policy rate at 11% in recent times on the grounds of inflation and external sector exposures.

However, given that inflation is likely to come back towards the long-run average level of 7% over the next few quarters, a cut in the rate would be helpful.

The current account projection has been improved because of a jump in remittances, and foreign exchange reserves are anticipated to exceed $13 billion as of June 2025.

Staff Reporter