KARACHI: Business and industrial community has expressed disappointment over the Monetary Policy Committee’s decision not to reduce the policy rate, warning that the move could stifle economic revival and increase pressure on an already ailing private sector.
They termed this decision completely contrary to the expectations of the business community, and calling it contrary not only to their demands, but also to prevailing economic indicators.
Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) expressed profound disappointment over the decision to maintain status quo in the key policy rate, keeping it at 10.5 percent.
The apex trade body has termed the decision as counterproductive and strictly disappointing vis-à-vis the industrial revival Pakistan desperately needs at the moment. He stated that the business community had categorically demanded a substantive reduction of 3.5 percent or 350 basis points to bring the policy rate down to 7 percent, immediately.
FPCCI Chief elaborated that the SBP’s cautious approach is baffling given the ground realities – with core inflation stabilised and hovering around 5 percent over the past many months and major economic indicators pointing towards a need for growth; and, this decision will continue to hamper access to finance for the industry.
Sheikh maintained that the industry is currently battling an existential crisis due to exorbitant energy tariffs and high borrowing costs. “We needed a shock therapy of a 3.5 percent cut to kick start the economy; instead, we got a status quo that will not help move the needle on the cost of doing business.”
He reiterated that the high cost of capital is the primary driver of industrial closures and the inability of Pakistani exporters to compete globally. They warned that if the monetary policy is not aggressively corrected in the next review to reach single digits, the target for export growth and industrial expansion for the fiscal year will remain elusive.
President FPCCI presented their demands as an immediate review of the monetary stance to align interest rates with the single-digit inflation figures; a clear roadmap from the SBP to bring the policy rate down to 7 percent and the declaration of an “Industrial Emergency” to save manufacturing units from shutting down due to the high cost of inputs and finance.
However, Saquib Fayyaz Magoon Senior Vice President of FPCCI highlighted the gap between the policy rate and the inflation rate. The real interest rate in Pakistan remains unsustainably high compared to our regional competitors, he added. He pointed out that when inflation has receded keeping the policy rate at double digits is unjustified. This decision continues to penalize the private-sector, restricts access to finance for SMEs, and hampers our export competitiveness.
The SBP has missed a crucial opportunity to align monetary policy with the government’s vision for industrial growth and export facilitation, he added.
Magoon said that the move runs contrary to the expectations of the country’s trade and industry. “Inflation has gradually come down to 5.6 percent, leaving ample room for a reduction in the policy rate. The State Bank could have easily brought interest rates into single digits, but failing to do so is discouraging for the business community,” he said. He explained that according to global principles, interest rates are determined by adding a positive real rate of 2 to 4 percent to the prevailing inflation. “If inflation is at 5.6 percent, then the policy rate should ideally be between 7.6 and 9.6 percent. This is a level the State Bank could have adopted without difficulty,” he noted.
He stressed that businesses had anticipated a cut to at least 7–8 percent, which would have provided much-needed relief and boosted economic activity. “The cost of financing is already unbearable, overall business expenses have surged, and energy tariffs remain exceptionally high. Elevated interest rates are further squeezing industrial and commercial operations,” he added.
Calling for urgent action, Magoon urged the government and the central bank to reconsider their stance in light of ground realities. “A single-digit interest rate is not only possible but essential for economic revival and restoring business confidence,” he emphasized.
Separately, Ahmed Azeem Alvi, President of the SITE Association of Industry (SAI) voiced strong disappointment over the State Bank’s decision to maintain the policy rate at 10.5 percent, terming it detrimental to economic growth and industrial activity.
Copyright Business Recorder, 2026
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