KARACHI: The business and industrial community has strongly criticised and rejected increases in the State Bank of Pakistan’s (SBP) policy rate, warning that the high borrowing costs are undermining industrial growth, discouraging investment, and hampering economic activity.
Business leaders argue that an elevated policy rate raises the cost of financing for industries and businesses, limits access to credit, and weakens the competitiveness of Pakistani products in both domestic and international markets.
Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI expressed profound concern, disappointment, and strong disapproval regarding SBP latest decision to increase the policy rate by another 0.5 percent; which brings the benchmark policy rate to a regionally-uncompetitive 12 percent.
He maintained that the FPCCI has termed the monetary tightening measure as counterproductive – warning that it deals a severe blow to ongoing economic stabilisation efforts, dampens industrial expansion, and further erodes the global export competitiveness of Pakistani products in international markets.
Sheikh, denouncing the central bank’s decision, stated that further inflating the cost of borrowing at a time when local manufacturers and commercial enterprises are already grappling with unprecedented operational overheads, soaring utility tariffs, and severe liquidity constraints is a step in the wrong direction.
At a crucial juncture where businesses desperately require affordable credit accessibility and economic stimulus to spur domestic production, sustain operations, and generate vital employment opportunities, tightening monetary policy further suffocates private sector growth and paralyses investment sentiment, he emphasized.
Sheikh pointed out that sustained high interest rates have fundamentally transformed borrowing from a business enabler into an unsustainable financial liability. Instead of curbing inflation – which has largely been driven by structural supply-side bottlenecks, escalating energy costs, and fiscal anomalies rather than excess aggregate demand—tight monetary policies have crippled domestic manufacturing.
Sheikh stressed that the high interest rates also place an unmanageable debt-servicing burden on the national exchequer and private borrowers, creating a vicious cycle of fiscal distress and stagnant economic output, he added.
However, the president of SITE Association of Industry (SAI), Abdul Hadi, strongly criticised raising the policy rate by 50 basis points, terming it an extremely difficult and unacceptable move for the business community.
He said taking the policy rate to 12 pc would further aggravate the problems of the industrial sector at a time when factories are already under severe pressure. Most units, he said, are operating far below their installed capacity and are barely surviving.
He expressed serious concern over the Monetary Policy Committee’s complete disregard for the business community’s repeated demand to bring the policy rate into single digits. This, he said, shows that the real problems of the industrial sector are not being taken seriously.
The SAI chief warned that the 50 basis point hike would not only make new funding harder to obtain but also increase the interest burden on existing loans, placing additional financial stress on businesses. He added that the move would further weaken the prospects of industrial growth and discourage fresh investment.
Abdul Hadi urged the government and the State Bank to prioritise the concerns of industrialists and take concrete steps to bring the policy rate down to a single-digit level at the earliest.
Meanwhile, Syed Raza Hussain, President of the Federal B Area Association of Trade and Industry (FBATI), has rejected the 50 basis points increase in interest rates, saying that increasing the interest rate from 11.5 percent to 12 percent will prove detrimental to industrial and business activities.
He said that due to expensive financing, the cost of industries and businesses will further increase, while industrialists are already facing high production costs, inflation and various economic pressures.
Access to credit will become more difficult, especially for small and medium enterprises (SMEs).
He said that industrialists and the business community expected that if the interest rate was not reduced, it would at least be maintained at the current level of 11.5 percent, however, an increase of 50 basis points is not an encouraging decision for the business environment.
He demanded that the government and the State Bank review economic policies keeping in mind the concerns of the industrial sector.
Copyright Business Recorder, 2026