Business Leaders Express Frustration Over State Bank of Pakistan's Interest Rate Decision

Strategic Insights -

Business leaders in Karachi voiced strong criticism over the State Bank of Pakistan's (SBP) decision to maintain the status quo on interest rates, warning that the policy continues to choke economic growth and industrial recovery. Karach Chamber of Commerce and Industry (KCCI) President Muhammad Jawed Bilwani expressed profound disappointment over the decision, saying that it was an overly cautious and counterproductive stance given easing inflation and worsening industrial competitiveness. The business community had pinned hopes on a rate reduction to single digits to help kick-start economic activity, reduce the cost of doing business, and support struggling industries.

Key Takeaways:

  • The State Bank of Pakistan's (SBP) decision to maintain the policy rate at 11% is seen as an overly cautious and counterproductive stance given easing inflation and worsening industrial competitiveness.
  • Inflation had clearly bottomed out, with independent analysts projecting it to remain between 6% and 7% for FY26, while both the International Monetary Fund (IMF) and the government estimate it at 7.5%.
  • The high interest rates have rendered Pakistan's industrial sector uncompetitive in the regional and global markets, with exporters struggling to maintain their foothold internationally and domestic manufacturers facing increasing pressure from cheaper imports.
  • The business community had demanded a single-stroke rate cut of 400 basis points during the monetary policy committee (MPC) meeting to rationalise the key policy rate.
  • Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh demanded a reduction in the key policy rate to 7% to align it with the vision of special investment facilitation council (SIFC) and the prime minister's vision for industrial development, import substitution, and export growth.

Statistics:

  • Interest rate: 11% (maintained by State Bank of Pakistan)
  • Inflation Forecast: 6-7% for FY26 (independent analysts' projection)
  • Inflation Estimate: 7.5% (IMF and government estimate)
  • Premium vis-a-vis Consumer Price Index (CPI): 750 basis points (basis points at which policy rate exceeds CPI)
  • Basis points demanded to rationalise key policy rate: 400 basis points

Sources:

  • "Frustration over State Bank's decision to maintain interest rates: Business leaders", [Source: Karachi Chamber of Commerce and Industry (KCCI) Statement - exact date not provided]
  • Statement of Atif Ikram Sheikh, FPCCI President
  • Statement of Ahmed Azim Alvi, SA Karachi President
  • [Name withheld by decision]