The Islamabad Chamber of Commerce & Industry (ICCI) has disagreed with the State Bank of Pakistan’s (SBP) decision to increase the benchmark interest rate by 2.5 percent, pushing it to 12.25 percent.

President ICCI Mohammad Shakeel Munir termed the decision ‘a harsh measure’ as it will negatively impact the growth of business activities and hurt exports.

He pointed out that India’s policy interest rate is four percent and Bangladesh’s is 4.75 percent. Similarly, it is 3.7 percent in China, 0.5 percent in Thailand, and 0.75 percent in Hong Kong, but Pakistan’s rate is the highest in the region.

Speaking to a delegation of the fruits and vegetable market in Islamabad during its visit to the ICCI, Munir warned that this massive hike will adversely affect all sectors of the economy and will lead to a further downfall in trade and industrial activities. He also called for the central bank to immediately revisit and withdraw this ‘irrational increase’ that can prove disastrous.

Munir continued that Pakistan’s economy is already plagued with rising inflation, sharp currency devaluation, unbearable foreign debt, depleting foreign exchange reserves, growing fiscal imbalances, and dwindling foreign direct investments. He said that these circumstances should have prompted the government to make a significant cut in the benchmark interest rate to promote the ease of doing business for the revival of business and economic activities. However, the elevated interest rate will make the credit cost unviable for the private sector, due to which the efforts to expand current businesses and make new investments will be hindered.

Munir further emphasized the central bank should reconsider its decision and reduce the interest rate to make the credit cost affordable for the business class.

Senior Vice President ICCI Jamshaid Akhtar Sheikh and Vice President ICCI Muhammad Faheem Khan said that the previous governments had used the policy of increasing the interest rate to control inflation but this policy has failed miserably. They said that instead of controlling inflation, the high interest rate will result in rapid de-industrialization that will retard GDP growth.

They also stressed that the SBP should withdraw the massive hike in interest rate to save the economy from its disastrous consequences.

Source: Pro Pakistan