FPCCI Chief Demands Emergency Policy Rate Cut Citing Lower Inflation 

Federation of Pakistan Chambers of Commerce & Industry (FPCCI) President Atif Ikram Sheikh has demanded that the key policy rate should be cut down to 9 percent to reflect the ground realities and economic indicators of Pakistan as CPI has clocked at 6.9 percent in September 2024   In a statement, he said that there will still be 200 bps premium at 9 percent policy rate, which is a safe buffer for any monetary policy which is looking at inflation in the single digits.     Sheikh demanded that an emergent meeting of the monetary policy committee (MPC) of the State Bank of Pakistan should be called, and a decision should be taken on the overdue reduction in key policy rate.    The next scheduled MPC meeting is on November 4, which will be too late to pass on the relief. We have an opportunity to cut the cost of doing business substantially through making access to finance possible at rational rates, he added.    The FPCCI president explained that the economy has cooled down over the last 16 months, from 38 percent inflation in May 2023 to 6.9 percent in September 2024. However, the policy rate has dropped only by 450 bps from 22 percent to 17.5 percent. It is the biggest contradiction of policymaking and economic governance in Pakistan, he added.    Sheikh elaborated that the government of Pakistan will be the biggest beneficiary of the reduction in interest rate as a 1 percent reduction in interest rate translates into approximately Rs. 476 billion reduction in debt burden and bringing interest rate in single digits will free up the government’s resources for development or infrastructure projects.     The FPCCI chief proposed that the country needs a renewed and effective temporary economic relief facility (TERF), export finance scheme (EFS), and long-term financing facility (LTFF) to boost economic activities, investments, industrialization, and exports.