Interest rate status quo disappoints business community
KARACHI: Business and industrial community has termed maintaining the interest rate at 11.5 percent as harmful to the industry and exports.
Saquib Fayyaz Magoon, Acting President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), expressed his profound disappointment over the State Bank of Pakistan’s (SBP) decision to maintain status quo on its key policy rate following the Monetary Policy Committee (MPC) meeting on Monday.
The apex trade body termed the decision as “contractionary”, warning that holding the benchmark interest rate at an elevated level would continue to stifle economic activity, hamper access to finance, and severely undermine industrial revival efforts across the country.
Saquib Fayyaz Magoon categorically denounced the central bank’s cautious approach, emphasizing that the business community had anticipated some reduction to help bring down the exorbitant cost of doing business — and facilitate trade and industry to cope with the economic challenges.
The acting FPCCI chief said that maintaining status quo on the policy rate in the current economic scenario was a setback to the business community’s expectations as Pakistani industry and exporters had already been battling an existential crisis due to elevated energy tariffs and sky-high financing costs.
Magoonsaid, “We cannot run our industries or compete in global markets under such punishing financial burdens. A single-digit interest rate is absolutely critical right now to lower production costs, make goods and services more affordable, and effectively kick start the economy.”
Abdul Mohamin Khan, VP and Regional Chairman (Sindh) of the FPCCI, said that with core inflation stabilizing, keeping the interest rate persistently high reflected an unjustified premium that made no economic sense. The continued high cost of capital remained the primary driver of industrial closures and the inability of Pakistani exporters to remain globally competitive.
Abdul Mohamin Khan warned the government of the immediate negative impact the MPC’s decision would have on commercial hubs and overall economic stability. Keeping the interest rate unchanged would undermine the business environment, discourage essential investment, and hinder any hopes of a swift economic recovery, he added.
The FPCCI maintained that the business community was the backbone of Pakistan’s economy, and a conducive monetary policy with a reduced, single-digit interest rate was essential to boost industrial output, create jobs, and stabilize prices.
The FPCCI urged the SBP to urgently reconsider its stance and adopt measures that genuinely supported business continuity and growth.
The President of the Korangi Association of Trade and Industry (KATI), Ikram Rajput, termed the State Bank of Pakistan’s decision to maintain the benchmark policy rate at 11.5 per cent as detrimental to the country’s industrial sector, warning that it could further slow the recovery of industrial activity, investment and exports.
Rajput said that while the growing geopolitical tension in the Middle East, concerns over rising global crude oil prices and external economic uncertainties could not be ignored, Pakistan’s domestic economic indicators present an equally challenging picture.
He said that escalating production costs, higher electricity and gas tariffs, and the recent trend of daily increases in petroleum prices have placed severe pressure on the industrial sector.
He said the central bank should have adopted a more accommodative monetary policy by initiating a gradual reduction in the policy rate to encourage investment and ease the financial burden on industries.
He urged the State Bank to announce a clear roadmap for bringing the policy rate down to a single-digit as soon as global economic conditions stabilize.
The KATI president observed that persistently high interest rates are discouraging fresh industrial investment, delaying capacity expansion and constraining production, while export-oriented industries are steadily losing their competitiveness in international markets.
He warned that if the cost of financing remains elevated, the country could face slower industrial growth, declining investment and rising unemployment, with serious consequences for the broader economy.
Rajput said that small and medium-size enterprises (SMEs), which form the backbone of Pakistan’s economy, employment and exports, are under significant financial stress due to expensive borrowing. He said high financing costs have adversely affected their expansion plans, production capacity and competitiveness, ultimately weighing on overall industrial growth.
He called on the State Bank of Pakistan to ensure the availability of concessionary financing for SMEs, export-oriented industries and the manufacturing sector.
He emphasized that monetary policy should not focus solely on controlling inflation but should also give equal priority to industrial development, investment, exports and strengthening the private sector.
“Business-friendly interest rates are essential to restoring investor confidence and laying the foundation for sustainable economic growth,” Rajput concluded.
Copyright Business Recorder, 2026