Atif Ikram Sheikh warns contractionary policy is killing exports, SMEs and industrial revival amid 18.1% jump in trade deficit
Karachi, September 14, 2026 – Mr. Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has expressed strong disappointment over the State Bank of Pakistan’s decision to maintain the status quo and keep the key policy rate unchanged at 11.5%.
Terming the decision “highly contractionary and counterproductive”, the apex trade body warned that holding the benchmark interest rate at an oppressive level will continue to severely stifle economic activity and undermine industrial revival efforts across the country.
“Monetary policy was the only potent tool left with the authorities at the moment to provide some facilitation to trade and industry. Unfortunately, it remained unutilized,” said Mr. Sheikh.
The FPCCI Chief stated that the business community had demanded a reduction in the policy rate to single-digits to help bring down the exorbitant cost of doing business. He noted that the central bank’s overly cautious approach directly contradicts current economic realities, especially as the trade deficit has climbed by 18.1% in July-August 2026 on a year-on-year basis.
“Industry is currently battling an existential crisis driven by elevated energy tariffs, burgeoning petroleum prices, geoeconomic uncertainty, and sky-high financing costs. This has resulted in stagnating industrialization across the country,” he added.
Mr. Sheikh explained that manufacturing sectors are suffering from severely stunted growth because businesses cannot secure the capital required to operate. “This stagnation is severely compounded by extreme difficulty in access to finance,” he said.
He stressed that with the cost of borrowing remaining prohibitively high, private-sector credit off-take will continue to plummet. This will crowd out small and medium enterprises (SMEs) as well as large-scale manufacturers from the formal credit market and leave them desperate for operational liquidity.
The FPCCI President warned that this sustained high cost of capital is the primary catalyst for declining exports. “Manufacturers are entirely unable to keep production costs competitive globally. Exporters are actively losing their hard-earned global market share to regional competitors who benefit from highly accessible, single-digit interest rates,” he stated.
“The exorbitant cost of export refinancing in Pakistan makes local goods uncompetitive, resulting in loss of export orders and declining foreign exchange earnings,” Mr. Sheikh added.
He highlighted that national targets for export growth and economic recovery will remain elusive under prevailing monetary and fiscal policies.
Urging immediate action, Mr. Atif Ikram Sheikh called on the State Bank of Pakistan to urgently reconsider its rigid stance and adopt measures that genuinely support business continuity and industrial growth.
