KARACHI: The business community on Monday expressed disappointment over the State Bank of Pakistan’s (SBP) decision to keep the policy rate unchanged, calling it misaligned with on-ground economic conditions.
Atif Ikram Sheikh, president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), said the decision to maintain the policy rate at 10.5 per cent was counterproductive at a time when the country urgently needs industrial revival. He said the business community had demanded a substantive cut of 3.5 percentage points to bring the rate down to 7.0 per cent.
Sheikh said the SBP’s cautious stance was difficult to justify given that core inflation has stabilised at around 5.0 per cent for several months, while key economic indicators point towards the need for growth. He warned that high borrowing costs would continue to restrict access to finance for industry.
He said businesses were already facing an existential crisis due to elevated energy tariffs and financing costs. Instead of the “shock therapy” needed to kick-start the economy, he said, the status quo would do little to ease the cost of doing business.
Sheikh added that the high cost of capital remains a key factor behind industrial closures and the declining competitiveness of Pakistani exporters. He warned that unless monetary policy is aggressively corrected in the next review, targets for export growth and industrial expansion would remain out of reach.
The FPCCI reiterated its demands, including an immediate review of the monetary stance to align interest rates with single-digit inflation, a clear roadmap to reduce the policy rate to 7.0 per cent, and the declaration of an industrial emergency to prevent further shutdowns of manufacturing units.
FPCCI Senior Vice President Saquib Fayyaz Magoon highlighted the wide gap between inflation and the policy rate, saying Pakistan’s real interest rate remains unsustainably high compared with regional competitors. He said maintaining double-digit rates despite easing inflation continues to penalise the private sector, restrict SME financing and undermine export competitiveness.
President of the Korangi Association of Trade and Industry (KATI) Muhammad Ikram Rajput also criticised the decision, saying it ran counter to business expectations and prevailing economic indicators. He said with inflation at 7.4 per cent and exports declining by 6.0 per cent year-on-year (YoY), there was room for at least a one-percentage-point rate cut.
Rajput questioned the SBP’s growth forecast of 3.75 per cent to 4.75 per cent, calling it inconsistent with ground realities, and stressed that sustainable growth was not possible without industrialisation. He warned that rising imports and falling exports were threatening the survival of industries and said affordable financing was essential to revive economic activity.
SITE Association of Industry President Ahmed Azeem Alvi also expressed disappointment over the decision, calling it detrimental to industrial activity and exports. He said even the central bank had acknowledged the decline in exports and rise in imports, underscoring the impact of high interest rates.
Alvi said a reduction of at least one to 1.5 percentage points would have helped bring interest rates into single digits and allowed policymakers to assess the benefits of cheaper financing. He added that a modest cut would have eased the cost of doing business and supported exporters without harming the economy.
