ISLAMABAD: The All Pakistan Textile Mills Association (APTMA) has urgently called for additional interest rate reductions to alleviate borrowing costs and stimulate economic growth.
The association’s plea comes as recent inflation data for July reveals a year-on-year (YoY) inflation rate of 11.8%, despite a recent monthly increase in prices, which has pushed real interest rates in Pakistan to the highest level in the region.
With the policy rate set at 19.5%, Pakistan’s real interest rate stands at 8.41%. This rate far exceeds those in neighboring countries, with China and India reporting much lower real interest rates of 3.21% and 1.4%, respectively. Meanwhile, Bangladesh and Turkey are experiencing negative real interest rates.
The comparative data highlights the disparity:
Pakistan: Inflation at 11.10%, Policy Rate at 19.50%, Real Interest Rate at 8.40%
China: Inflation at 0.20%, Policy Rate at 3.40%, Real Interest Rate at 3.20%
India: Inflation at 5.10%, Policy Rate at 6.50%, Real Interest Rate at 1.40%
Vietnam: Inflation at 4.40%, Policy Rate at 4.50%, Real Interest Rate at 0.10%
Bangladesh: Inflation at 9.70%, Policy Rate at 8.50%, Real Interest Rate at -1.20%
Turkey: Inflation at 61.80%, Policy Rate at 50.00%, Real Interest Rate at -11.80%
APTMA argues that with the current high real interest rate, combined with recent government-imposed royalties and taxes on various sectors, further reductions in interest rates are crucial for boosting economic activity. The association believes that easing borrowing costs will help invigorate Pakistan’s economic sectors and offset the impact of recent fiscal measures.
