KARACHI: The Chairman of National Business Group Pakistan, the President of the Pakistan Businessmen and Intellectuals Forum, the President of All Karachi Industrial Alliance, the Chairman of the FPCCI Advisory Board, Mian Zahid Hussain, said that inflation has come down due to the government’s strict economic policies.
However, he said, the masses have yet to benefit from the reduction in inflation, for which some steps are necessary. The authorities need to make serious efforts to reduce poverty so that the distressed people can receive some relief.
He said that a two-percent reduction in interest rates is necessary to improve the economic situation. The State Bank of Pakistan is expected to announce the interest rate on Monday. The business community believes that the central bank will cut interest rates for the seventh time because inflation continuously decreases.
He said that the State Bank started reducing the interest rate in June 2024, which was 22 percent at the time. During the Monetary Policy Committee meeting in January, the State Bank reduced the policy rate by 150 basis points, after which the interest rate came down to 12 percent. However, he said the business community is calling it insufficient and demanding a further reduction.
Mian Zahid Hussain said that some economists are indicating the possibility of a 50 to 100 basis points cut in the interest rate this time. At the same time, some believe that the central bank will maintain the interest rate, which will increase disappointment in the business community.
He said that the inflation rate in February was 1.5 percent, which is why the central bank should not act unnecessarily cautiously but boldly decide to restore business activities. The central bank predicted in January that the inflation rate would further slow down. Still, a slight increase is possible in the coming months. Some economists believe that the increase in inflation is not expected before May, while others believe that inflation will increase by six to eight percent by December.
He added that inflation would remain in single digits at present, so the central bank should cut interest rates by at least two percent. At present, an IMF delegation in Pakistan is concerned about the decline in revenue. He observed that if the international organization emphasizes increasing tax revenues, it may increase inflation. If the IMF emphasizes an extraordinary increase in the tax target for the new fiscal year in that case, the government will have to increase tax rates, which may increase inflation. Still, if revenues are increased by increasing the tax base, inflation may decrease instead of increase.
Copyright Business Recorder, 2025
