Karachi: To stimulate economic growth, enhance employment opportunities, promote sustainable development, and increase tax revenue, it is essential to boost lending to the private sector. Attracting the private sector towards borrowing necessitates a reduction in interest rates, and the government must take immediate steps to bring the rate down to between 10% and 12%.
Pakistan’s economic indicators are improving, with inflation now at 9%, and interest rates having decreased from 22% to 17.5%. Factors such as a reduction in government investment bond rates, an increase in remittances, the privatization of Pakistan International Airlines (PIA), a decline in global crude oil prices, improved credit ratings from Moody’s and Fitch, and securing a $7 billion loan from the International Monetary Fund (IMF) are all contributing to strengthening Pakistan’s economy.
However, to fully leverage these economic achievements, it is crucial to mobilize the private sector completely. Currently, the private sector is securing only 12% of total borrowing, whereas this figure stands at 38% in Bangladesh and 50% in India.
Moreover, the advance-to-deposit ratio has plummeted from 80% to just 40% over the past fifteen years. To attract the private sector towards borrowing, a decrease in interest rates is imperative.
The government must act swiftly to lower interest rates to between 10% and 12%. Additionally, controlling luxury and unnecessary imports, focusing on boosting exports and remittances, and promoting small and medium-sized enterprises (SMEs) will be essential steps in fostering a more robust economic environment.
