Industry decries SBP's 'incomprehensible' move

The business community has voiced sharp criticism of the State Bank of Pakistan's (SBP) decision to maintain the policy rate at 11%, calling it "incomprehensible" and "counterproductive" at a time when inflation has dropped to just 3%.

Leaders of the Korangi Association of Trade and Industry (KATI), the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), and the SITE Association of Industry (SAI) warned that the high interest rate, still the highest in the region, was choking industrial growth, discouraging investment, and undermining the government's own economic recovery plans.

Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has strongly criticised the SBP's decision to maintain the policy interest rate at 11%, calling it "incomprehensible" considering the current economic conditions. Sheikh expressed deep concerns over the adverse impact of this decision on the business environment and the broader economy.

Sheikh emphasised that, given the prevailing inflation rates, the policy interest rate should ideally be reduced to a range of 6-7% to align with economic realities and foster growth. He highlighted that a reduction in the interest rate could have led to a significant decrease in the government's debt burden by approximately Rs3.5 trillion, providing much-needed fiscal relief.

He highlighted that inflation has come down to 3% in the month of August 2025 as per the government's own statistics. "Pakistan's interest rate is significantly higher than those in other countries in the region," noted the FPCCI president, pointing out that the elevated rate stifles economic activity and discourages investment. He underscored that for businesses to thrive and remain competitive, the policy rate must be brought down to a single-digit figure.

SAI also strongly criticised the SBP for maintaining the policy rate at 11%, warning that the decision could derail the government's efforts to stimulate economic activity and deter investment.

In a statement, President of the SITE Association of Industry, Ahmad Azeem Alvi, expressed deep concern over the central bank's decision, reiterating the business community's long-standing demand to bring the policy rate down to single digits.

"Despite a consistent decline in inflation in recent months, the SBP has opted not to ease its monetary policy. This decision is disappointing and counterproductive, especially when the government is striving to revive economic momentum," said Alvi.

KATI President, Junaid Naqi, expressed deep disappointment over the SBP's decision to maintain the monetary policy rate at 11%.

He noted that with inflation currently at a historic low of 3%, there was ample room to reduce the policy rate. "The business community has long demanded a significant cut in the interest rate and its reduction to single digits, which is crucial to provide relief to the industrial sector," he said.

Naqi stressed that the high interest rate continues to hurt industrialists and exporters, who are already struggling with acute capital shortages.