Businessmen dismayed by status quo

Demand single-digit policy rate; say high borrowing costs threaten industrial recovery

KARACHI:

Leading business and industry associations on Monday expressed disappointment over the State Bank of Pakistan's (SBP) decision to maintain the policy rate at 11.5%, arguing that the move would continue to burden businesses with high borrowing costs and slow the pace of economic recovery.

The criticism came shortly after the SBP's Monetary Policy Committee (MPC) announced that it would keep the benchmark interest rate unchanged, citing inflationary pressures and evolving economic conditions.

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Karachi Chamber of Commerce and Industry (KCCI) and Korangi Association of Trade and Industry (KATI) all urged the central bank to adopt a more accommodative monetary stance and gradually bring the policy rate into single digits.

FPCCI President Atif Ikram Sheikh termed the decision a continuation of the contractionary monetary policy that was detrimental to economic growth and industrial expansion. He argued that keeping the policy rate in double digits would accelerate de-industrialisation, undermine export competitiveness and hamper the country's efforts to earn foreign exchange through exports.

"The economy cannot transition to a growth model without a rationalised, single-digit interest rate that aligns with domestic realities and investment objectives," Sheikh said. He maintained that inflationary pressures were likely to ease in the coming months due to improving global conditions, including expectations of reduced geopolitical tensions and stabilisation in energy markets.

Acting KCCI President Muhammad Raza said the business community had expected the central bank to reverse at least the 100-basis-point increase introduced during the previous monetary policy review. He noted that improving economic indicators and easing global uncertainties had created room for reducing borrowing costs. "The business community expected that the State Bank would withdraw the previous increase and send a positive signal to investors and industrialists," he said.

Raza argued that high interest rates continued to increase the financial burden on businesses at a time when industries were already facing rising energy tariffs, taxation pressures and higher operational costs. He stressed that sustainable economic growth required affordable access to finance and called for the monetary policy to be aligned with the goals of industrialisation, export promotion and employment generation.

Korangi Association of Trade and Industry President Muhammad Ikram Rajput also voiced concern over the decision, saying industries had anticipated a more supportive policy stance in light of relatively stable inflation and improving macroeconomic conditions.

He said expensive borrowing remained a major hurdle to private-sector investment, industrial growth and job creation, particularly for small and medium enterprises (SMEs).