The Monetary Policy Committee has called for a 400 basis point cut in interest rates

ISLAMABAD: In a bid to ease financial pressure on the industrial sector, the All Pakistan Textile Mills Association (APTMA) has urged the Monetary Policy Committee (MPC) to cut interest rates by at least 400 basis points in its next meeting on November 4.

Asking the MPC to reduce the discount rate, which is now at 17.5%, APTMA chairman Kamran Arshad stressed in a statement on Thursday that export businesses are extremely concerned about the persistently high interest rates, The News was mentioned.

Arshad added that the real interest rate was at an unsustainable 10.6% with inflation at 6.9% in September 2024. He stressed that to give the industrial sector the needed help, monetary policy needs to be adjusted to reflect the state of the economy.

“Inflation has been steadily declining since November 2023,” the APTMA chairman said. “It is vital that the MPC realigns its policy to reflect these changes and support the struggling industrial sector.”

According to the Pakistan Bureau of Statistics (PBS), inflation decreased to 11.1% in July 2024 and then to 6.9% in August, Arshad said. He said the MPC had been slow to modify interest rates in light of the significant drop.

“High real interest rates stifle economic activity, especially for industries that need capital to sustain operations and drive growth,” he added.

The textile sector, a cornerstone of Pakistan’s economy and a key driver of exports and employment, has faced severe liquidity constraints due to unsustainable borrowing costs over the past two years. “Affordable financing is crucial,” Arshad said. “If no other relief is possible, the least that can be done is to reduce interest rates to manageable levels.”

High real interest rates, he argued, discourage investment in key sectors, particularly textiles.

“Without access to affordable capital, these industries struggle to expand, innovate or compete globally, jeopardizing export potential and the livelihoods of millions of workers.

“The current direction of monetary policy is not aligned with efforts to stimulate economic growth. The MPC’s priority should be to promote an environment conducive to recovery. As inflation has come down significantly, there is sufficient justification for a significant reduction in interest rates. Such a move will ease financial pressure on businesses, spur investment, boost productivity and create jobs,” Arshad noted.

He said APTMA is calling on the MPC to take decisive action by cutting interest rates by at least 400 basis points, arguing that a sharp cut is necessary to revive the economy. creating fiscal space for public spending; and ensuring the survival and growth of critical industries.