by As Pakistan prepares for the State Bank’s Monetary Policy Committee (MPC) meeting scheduled for July 30, 2025, leading business groups—including KCCI, FPCCI, Pakistan Business Forum (PBF), and United Business Group (UBG)—are urging the central bank to reduce its policy interest rate sharply from 11% to as low as 5–6%.
📉 Why They Want a Sharp Cut
- Inflation has dropped steeply. Consumer Price Index (CPI) recently slowed to as low as 0.3 percent in June, while overall inflation is down to around 3–4 percent.
- High interest — low inflation mismatch. With interest rates held at 11%, businesses are shouldering an unjustified cost premium.
- Regional competitiveness. Neighboring economies have much lower benchmark rates—such as India at ~5.5%, Vietnam at ~6.3%, Cambodia at ~3%, and others. This disparity puts Pakistani industry at a competitive disadvantage.
- Debt servicing savings. Present government interest liabilities total Rs 8.5 trillion. Business leaders estimate that reducing the rate to 6% could save about Rs 3.5 trillion annually.
- Business Industry Demands SBP to Cut Key Interest Rate to 6%.
👥 Who’s Leading the Charge
- KCCI President Muhammad Jawed Bilwani highlighted Pakistan’s lack of competitiveness due not only to high interest rates but also expensive energy costs.
- Korangi Association of Trade & Industry (KATI) President Junaid Naqi warned that without a rate cut, industry capacity utilization declines and job losses become inevitable.
- UBG Patron-in-Chief S.M. Tanveer backed the demand, noting the gap between inflation (0.3–4%) and the current 11% rate, and underscored the IMF’s guidance for real positive rates.
- PBF Karachi Region President Malik Khuda Bakhsh supported UBG’s demand and emphasized that Pakistan’s export competitiveness hinges on lower financing costs.
- FPCCI President Atif Ikram Sheikh demanded a one-time 500 bps cut and argued that policy should be in line with the Special Investment Facilitation Council’s export growth vision
🌐 Economic Context & Risks
- SBP rate cuts to date. Since mid‑2024, the SBP has already reduced rates from a high of 22% down to 11% as of May 6, 2025—a total of 1,100 bps.
- Pausing the easing cycle. In March 2025, the MPC unexpectedly kept the rate at 12%, citing remaining inflation and external sector risks. Analysts expected more cuts ahead once clarity on IMF review and global conditions improved.
- Analysts’ forecasts. Recent market surveys suggest a likely 50–100 bps cut at the upcoming MPC meeting, with a full-year cut of around 100 bps expected by December 2025.
- Business Industry Demands SBP to Cut Key Interest Rate to 6%.
⚙️ Potential Benefits vs. Challenges
✅ Benefits
- Lower financing costs would help SMEs and large manufacturers expand operations and renew stalled investment.
- Export competitiveness could improve, with borrowing costs aligning more closely with global markets.
- Fiscal relief—lower rate would also reduce government debt servicing burden, freeing up policy space.
⚠️ Risks & Caveats
- SBP must balance cuts with potential import surge, exchange rate volatility, or inflationary pressures triggered by looser monetary policy.
- IMF conditions and macro‑fiscal discipline remain critical; structural reforms are still essential to accompany rate easing.
📊 Snapshot: Business Sector Rate Demands
| Representative | Demand | Reason |
|---|---|---|
| KCCI | 5–6% | Aligning with regional rates, lowering business costs |
| UBG / PBF | 6% | Fiscal savings, export support, real rate alignment |
| FPCCI | 6% (500 bps cut) | Promotion of investment, export & industrial growth |
| KATI, SITE, others | 5–6% | Revive capacity utilization, reduce unemployment |
✅ Final Thoughts
The business community is urging a bold shift to single-digit interest rates, arguing that the current 11% benchmark is at odds with inflation realities and regional norms. With inflation near 0.3–4%, the calls—from KCCI to FPCCI to UBG—demand a policy rate of 5–6%, ideally delivered in one decisive move.
While the SBP has room to ease, it must also remain cautious of external vulnerabilities and ensure monetary policy supports sustainable economic growth. For businesses hoping to grow, invest, and export, the upcoming MPC meeting is a critical test of whether the central bank can act with bold realism to support recovery.
