Business leaders remind SBP of the pitfalls of keeping interest rates in double digits

KARACHI: The leadership of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) has reiterated its demand for an urgent and substantial monetary easing cycle.

The apex body called upon the government, the ministry of finance, and the governor of the State Bank of Pakistan (SBP) to immediately reassess this “counterproductive approach” and implement a decisive rate cut in the next MPC -– bringing it to the single digit.

The FPCCI maintains that without transitioning swiftly from a stabilization model to an aggressive, export-led growth framework, the country risks permanent stagnation in its industrial base.

The Acting President of the Karachi Chamber of Commerce & Industry (KCCI), Muhammad Raza, said that the SBP’s decision to maintain the policy rate at 11.5 percent had disappointed the business community.

Atif Ikram Sheikh, president of the FPCCI, denounced the status quo in the contractionary monetary policy by the State Bank of Pakistan in its Monetary Policy Committee (MPC) meeting held on Monday.

He said that a static policy rate in the double digits had been highly detrimental to the nation’s economic survival, and failure to ease borrowing, costs will accelerate and severely compromise export targets — which were highly-critical for earning precious foreign exchange for the country, he added.

Atif Ikram Sheikh expressed his concern over the central bank’s “disconnect” from the challenges being faced by the trade and industry. The decision to hold the policy rate was unfortunate, despite a clear downward expectation in inflation numbers on the back of the impending US-Iran peace deal being facilitated by Pakistan, leading to gradual normalization of global energy supplies.

He said, “We are witnessing a cost of doing business crisis across the manufacturing landscape. The SBP’s overly cautious, contractionary stance is starving the private sector of essential capital.

“We reiterate our unwavering demand that the economy cannot transition to a growth model without a rationalized, single-digit interest rate that aligns with the realities of the domestic market — and the vision of the Special Investment Facilitation Council (SIFC).”

Saquib Fayyaz Magoon, SVP of the FPCCI, highlighted the unsustainability of the current economic environment. The benchmark policy rate had created an artificially high cost of capital that no legitimate business could absorb.

“Our regional competitors are operating with significantly lower borrowing costs, rendering Pakistani exports fundamentally uncompetitive in the global arena. Maintaining the status quo only penalizes the SMEs and large-scale manufacturing alike, effectively halting capacity expansion and job creation,” he added.

Abdul Mohamin Khan, VP and regional chairman (Sindh) of the FPCCI, said that the impact of this prolonged, high-interest-rate environment was catastrophic.

“We are seeing factory closures and scaled-back operations across the industrial heartlands. The status quo is not a measure of stability; it is a recipe for stagnation. The industrial sector requires immediate, tangible relief to stay afloat, pay exorbitant energy tariffs, and maintain their workforce,” he added.

The Acting President of the Karachi Chamber of Commerce & Industry (KCCI), Muhammad Raza, while expressing disappointment over the State Bank of Pakistan’s decision to keep the policy rate unchanged at 11.5 percent, stated that the business community had keenly expected a reversal of the previous increase of 100 basis points in view of improving economic indicators and easing global uncertainties.

He said that the cost of doing business in Pakistan had been already alarmingly high, making it increasingly difficult for industries and businesses to remain competitive.

“Karachi Chamber has consistently maintained that the policy rate should be brought down to single digit to provide meaningful relief to trade and industry, stimulate economic activity and encourage fresh investments,” he added.

Muhammad Raza recalled that during the previous Monetary Policy Committee meeting, the policy rate had been increased by 100 basis points due to concerns arising from inflation expectations and uncertainties prevailing at that time.

However, the circumstances had now started changing in a positive direction, creating space for a reduction in the borrowing costs.

Referring to the recent international developments and encouraging signals emerging over the past few days, he noted that prospects of a peace agreement and the gradual easing of geopolitical tensions were contributing towards greater economic stability. Furthermore, international oil prices and the overall global environment were also moving towards a more favorable trajectory, which should have been taken into account while formulating the latest monetary policy.

“The expectation of the business community was that the State Bank would, at the very least, withdraw the 100 basis points increase made in the previous policy announcement. Such a move would have sent a positive signal to investors and industrialists and would have supported economic recovery,” he remarked.

Muhammad Raza said that persistent high interest rates continued to increase the financial burden on businesses, discourage industrial expansion and impede efforts aimed at enhancing exports and generating employment opportunities.

He said that in an environment where businesses had already been grappling with elevated energy tariffs, taxation pressures and rising operational costs, maintaining a high policy rate only compounded the challenges confronting the productive sectors of the economy.

He emphasized that sustainable economic growth could not be achieved without providing affordable access to finance.

Therefore, monetary policy should be aligned with the broader objective of promoting industrialization, boosting exports and ensuring higher economic growth.

Copyright Business Recorder, 2026