Decision to maintain policy rate sparked mixed reactions

KARACHI: Following strong calls from the business community for a significant reduction in the interest rate, expectations were high that the monetary policy would bring much-needed relief to support industrial revival and job creation.

However, to the surprise of both experts and the business community, the State Bank of Pakistan, in its recently announced monetary policy, decided to keep the policy rate unchanged at 11 percent.

The central bank cited concerns over a higher inflation outlook, unexpected adjustments in administered energy prices, and the potential impact of widespread floods said Ateeq ur Rehman (economic and financial analyst).

The decision to maintain the policy rate has sparked mixed reactions across economic circles. While the central bank’s caution reflects a desire to contain inflationary pressures and preserve macroeconomic stability, many economists argue that the high interest rate environment continues to stifle investment, industrial productivity, and employment generation.

Businesses facing escalating costs of production and limited access to affordable credit fear that the unchanged rate may slow down the pace of economic recovery, particularly in the manufacturing and export-oriented sectors that urgently require liquidity support to regain competitiveness.

But under the challenging economic conditions by the middle class surviving for safe shelter, food, medicine, education, clean water, electricity, gas, public transport etc, the Banks, Financial Institutions and NBFIs should consider the agony and anguishes of their Saving Account holders, mostly senior citizens, disabled, pensioners, endowment fund holders, etc. The reduction in interest rate is continuously reducing their income of reliance and daily bread, added Ateeq.

Again, a savings account holder for example a widow / a non filer is payable a tax by 30 percent (WHT), further on her withdrawal of profit in cash has to pay 0.8 percent as another WHT for Rs. 50 thousand and above withdrawal.

There is a pressure on saving account holders to convert their accounts into current accounts, so what are the compliances and benefits available through current account.

Consequently, Banks & Financial Institutions should bring relief to the economic growth from saving prospective, particularly the industry / business and the poor saving account holders, said Ateeq.

Copyright Business Recorder, 2025