Federation of Pakistan Chambers of Commerce & Industry (FPCCI) President Atif Ikram Sheikh Monday termed the 150 basis points (bps) rate cut too little, too late.
In a statement, Sheikh said the business, industry, and trade community was expecting higher and more substantive cut in the key policy rate of the State Bank of Pakistan due to a decline in core inflation.
The FPCCI president said that the interest rate should come down to 15 percent to enable exporters to compete in the regional and international export markets by reducing the cost of capital. This step should be accompanied by the fulfillment of the government’s promise to rationalize electricity tariffs for the industry, he added.
He said that consumer prices are showing a declining trend as they fell by 3.2 percent in May 2024 compared to a decrease of 0.4 percent in April 2024 as per the Pakistan Bureau of Statistics (PBS). It is now overdue to provide respite to the business community in their access to finance from commercial banks through effectively and appropriately cutting the key policy rate, he added.
He also questioned the seriousness of government, on behalf of the entire business, industry, and trade community of Pakistan, in bringing transparency and consultation in economic policymaking.
He reiterated his stance that the government should provide answers to the two sets of questions for businesses to plan their year ahead: (i) what are the measures that are being undertaken to obtain the new IMF program and how would they affect the cost of doing business in Pakistan (ii) what steps will be taken after the signing of IMF program to stabilize the economy and how and when the government plans to take the business community into confidence on these measures.
Sheikh proposed that to promote price stability, SBP should break the inflation rate into cost-pushed and demand-pulled. He recommended that the SBP should target core inflation; non-food non-energy (NFNE); for operational guidance.
Moreover, he said that SBP needs to strip out volatile changes in particular prices to distinguish inflation from temporary fluctuations in inflation. Efforts need to be made to control price manipulation and hoardings in liaison with the respective federal and provincial government departments. An active and efficient Competitive Commission of Pakistan (CCP) and effective price control mechanisms also need to play their due role.
