KARACHI: Leading voices from Pakistan’s trade and industrial sectors have strongly criticised the State Bank of Pakistan’s (SBP) decision to raise the policy rate by 100 basis points to 11.5%, warning that the move could hamper exports, investment, and overall economic growth.
Business leaders described the increase as ill-timed, arguing that it comes at a sensitive phase when the economy is showing signs of stabilisation, despite external pressures such as the ongoing Middle East conflict.
They pointed out that even during periods of relatively low inflation, the policy rate remained elevated at 10.5%, despite repeated calls from industry stakeholders to bring it down to single digits in line with regional economies.
However, not all stakeholders opposed the decision. Secretary General of the Overseas Investors Chambers of Commerce and Industry (OICCI), M. Abdul Aleem, termed the hike largely anticipated and necessary to ensure macroeconomic stability. While acknowledging the added burden on manufacturing and other sectors, he emphasised that long-term economic sustainability and foreign investment depend on maintaining stability.
He stressed the need for accelerated structural reforms, particularly in the energy sector and tax system, to offset rising capital costs and support fragile industrial growth.
On the other hand, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh warned that continued monetary tightening could severely damage already struggling industrial and export sectors. He argued that high borrowing costs contradict the government’s objectives of economic revival, export expansion, and job creation, making Pakistani products less competitive in global markets.
FPCCI Senior Vice President Saquib Fayyaz Magoon expressed concern that the hike would further restrict access to affordable financing, especially for small and medium-sized enterprises (SMEs). He cautioned that rising energy costs and compliance burdens, combined with expensive credit, could push many businesses toward default or closure, undermining revenue targets.
Karachi Chamber of Commerce and Industry (KCCI) President Muhammad Rehan Hanif said inflationary pressures had been relatively contained before recent geopolitical developments and did not justify a rate increase. He suggested that maintaining the existing rate would have been a more balanced approach under the current circumstances.
Industry leaders also highlighted that several regional economies continue to maintain policy rates between 5% and 8% to support economic activity, placing Pakistan at a competitive disadvantage due to its higher interest rate environment.
SITE Association of Industry President Abdul Rahman Fudda warned that higher borrowing costs would discourage investment and strain working capital cycles. He noted that Pakistan’s inflation is largely driven by supply-side factors, exchange rate fluctuations, and administered prices—issues that monetary tightening alone cannot effectively address.
Similarly, Korangi Association of Trade and Industry President Muhammad Ikram Rajput stressed the need for supply-side reforms, lower energy costs, and a more business-friendly environment to control inflation sustainably.
North Karachi Association of Trade and Industry President Faisal Moiz Khan added that high interest rates, coupled with rising petroleum prices, are significantly increasing production costs, threatening the viability of manufacturers and further weakening the export sector.
Overall, industry stakeholders warned that the latest rate hike could intensify financial pressures, dampen investment sentiment, and slow economic momentum at a time when the country can least afford it.
Story by Aamir Shafaat Khan
