Malik Alarms High Interest Rates Cripple Business Growth
In a fervent appeal, Karim Aziz Malik, the Chairman of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has sounded the alarm on the crippling impact of soaring interest rates on Pakistan's economy. Malik urged the government to promptly address the issue by significantly reducing interest rates, emphasizing the need to revive the private sector and bolster GDP growth.
The chairman underscored the severe repercussions of the current 22% interest rate on businesses, stating that the exorbitant rates make borrowing for expansion unaffordable, diverting funds towards debt servicing rather than operational reinvestment. This has resulted in a substantial decline in bank advances for the private sector, plummeting from Rs 1329 billion in FY 2022 to Rs 208 billion in FY 2023, severely impeding business expansion and job creation.
Malik warned that the ambitious development goals set by the government are becoming increasingly challenging to achieve, with key sectors such as textiles, paperboard, iron & steel, and mass manufacturing experiencing a significant downturn. Contrary to the argument that high interest rates are necessary to control inflation, Malik argued that the current 22% rate has failed to yield the desired results, exacerbating the decline in GDP.
To break this detrimental cycle and rejuvenate the economy, Malik advocated for a substantial reduction in interest rates. Lower borrowing costs, he argued, would stimulate business activity, enhance production, and generate new jobs, ultimately fostering economic recovery.
The FPCCI Chairman's impassioned plea sheds light on the precarious state of the Pakistani private sector within the restrictive credit environment. If unaddressed, this situation could further impede economic growth, hinder job creation, and jeopardize the government's development agenda. Malik's call for reduced interest rates echoes the growing concerns within the business community, urging the government to adopt policies supporting private sector growth and unlocking its potential as a key driver for the country's economic turnaround.
