Pakistan’s business community has expressed strong disappointment after the State Bank of Pakistan (SBP) decided to keep the policy interest rate unchanged at 11.5 percent, arguing that the move could slow investment, weaken industrial activity, and increase financial pressure on businesses.
The criticism came after the SBP’s Monetary Policy Committee announced its latest policy decision. In a statement issued following the meeting, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) Acting President Saquib Fayyaz Magoon described the decision as “contractionary” and said that businesses had been expecting a reduction in borrowing costs.
Business leaders argue that lower interest rates are essential for reviving economic activity, particularly at a time when many industries are facing high operating costs, subdued demand, and limited access to affordable financing. They believe that maintaining the policy rate at 11.5 percent keeps borrowing expensive for manufacturers, exporters, traders, and small businesses.
According to the FPCCI, expensive credit discourages companies from expanding operations, purchasing new machinery, hiring workers, or investing in technology. Industrialists say that a rate cut could have provided much-needed relief and helped accelerate economic recovery.
The business community has also linked interest rates to competitiveness. Export-oriented industries often rely on bank financing to meet working capital needs and fulfill international orders. Higher borrowing costs can reduce profit margins and make Pakistani products less competitive in global markets.
The SBP, however, typically bases its monetary policy decisions on factors such as inflation trends, exchange rate stability, economic growth, and external sector conditions. Central banks often maintain higher interest rates when they believe inflation risks remain elevated or when financial stability needs to be protected.
Economists note that there is often a tension between the objectives of controlling inflation and stimulating growth. While businesses prefer lower rates to support investment and production, central banks may choose caution if they believe premature easing could reignite inflationary pressures.
The FPCCI’s criticism reflects broader concerns among industrial and commercial stakeholders about the pace of economic recovery. Many business owners had hoped that easing inflation would create room for a policy rate reduction, lowering financing costs and encouraging fresh investment across key sectors.
Analysts say future monetary policy decisions will depend on incoming economic data, including inflation figures, fiscal developments, foreign exchange reserves, and overall growth indicators. If inflation continues to moderate and economic conditions stabilize further, the central bank may have greater flexibility to consider a rate cut in upcoming meetings.
For now, the SBP’s decision means that commercial lending rates are likely to remain relatively high, affecting businesses seeking new financing. The reaction from the FPCCI highlights the ongoing debate over whether monetary policy should prioritize inflation control or provide stronger support for economic growth and industrial expansion.
