Interest rate cut possible but decision lies with SBP: finance minister

• Banks urged to help revive sick industries.
• $2.3bn profit repatriated by multinationals.
• Circular debt reduction among govt priorities.

Federal Finance Minister Muhammad Aurangzeb has said there is room to reduce the interest rate, but any such decision rests solely with the State Bank of Pakistan (SBP).

The State Bank of Pakistan (SBP), in its last meeting, held the key policy rate steady at 11%, citing inflationary risks and external uncertainties triggered by the Iran-Israel conflict.

The central bank had lowered the interest rate by 100 basis points (bps) to 11% on May 5. The central bank had cut the rate by 1,100 basis points since June from an all-time high of 22%.

Speaking to journalists in Karachi today, Aurangzeb stated that the economy is now on a path to stability due to the removal of structural barriers. “The government’s steps have begun yielding results, and economic indicators are improving,” he said.

He highlighted that both local and foreign investors are now being engaged in efforts to boost economic growth. “Multinational companies repatriated $2.3 billion in profit in the fiscal year ending June 30, a sign that issues like blocked profit repatriation and letters of credit have been resolved,” the finance minister noted.

He stressed that banks must play a role in reviving ailing industrial units and should be active participants in the privatisation process.

“We have asked commercial banks and the SBP how they plan to contribute to economic stability. Their role is vital,” Aurangzeb added, following a meeting with the central bank governor and heads of commercial banks.

Aurangzeb clarified that the Federal Board of Revenue’s (FBR) new enforcement powers are linked to sales tax, not income tax. He also announced the simplification of the tax return filing process for salaried individuals and small businesses.

“An easy tax form is now available on the FBR website. It will also be offered to small traders and SMEs,” he said.

Answering a question about fiscal relief, he said: “We’ve provided as much relief to salaried individuals as possible within the available fiscal space.”

He added that while every finance minister wishes for rapid growth, such a move would strain foreign exchange reserves. Therefore, any decision to reduce the interest rate must be carefully evaluated and is ultimately the prerogative of the SBP.

FinMin meets OICCI leadership

Separately, the Overseas Investors Chamber of Commerce and Industry (OICCI) hosted the finance minister for a high-level dialogue with senior leadership from major multinational companies operating in Pakistan.

During the session, Aurangzeb shared "encouraging signs" of improving macroeconomic indicators and rising business confidence, as also reflected in the latest OICCI Business Confidence Survey.

“We are witnessing early signs of macroeconomic recovery, but to break free from recurring cycles of instability, Pakistan must take bold and sometimes difficult decisions,” said Aurangzeb. “The government is fully committed to supporting the business community by ensuring a transparent, predictable, and investment-friendly environment.”

Responding to concerns raised by OICCI members, he assured them of the government’s resolve to address policy challenges and unlock the country’s full investment potential.

The finance minister also urged investors to look into key high-potential sectors for investments, including Mining and Minerals, Agriculture, IT, Infrastructure, among others.

Speaking on the occasion, OICCI President Yousaf Hussain acknowledged the government’s progress in stabilising the economy and underscored the importance of strengthening institutions.

“We welcome the improving macroeconomic indicators and renewed signs of stability. To convert this into sustained growth, we must strengthen our institutions, invest in professional capacity, and ensure consistent policymaking,” he said, adding that the induction of qualified technocrats and timely execution, particularly through a comprehensive national economic recovery plan, are essential to moving forward.