Industry slams SBP’s ‘penal’ rate policy
2026-01-27 - 02:39
KARACHI: While seeking a single-digit interest rate, businessmen have rejected the State Bank’s decision to maintain interest rates at 10.50 per cent, terming it disappointing and counterproductive at a time when industrial revival and a boost in exports are the need of the hour. The SBP’s cautious approach is baffling, given the ground realities – with core inflation stabilised at around 5 per cent over the past many months and major economic indicators pointing to the need for growth. However, the status quo in interest rates at 10.5pc will continue to hamper the industry’s access to finance, local businessmen said. In contrast, Overseas Investors Chambers of Commerce and Industry Secretary General M. Abdul Aleem told Dawn that the State Bank’s decision to retain the interest rate without a prudent reduction may have surprised many who were looking for a minor cut. However, these are decisions made on economic fundamentals, not on the wishes of some key stakeholders, he said, adding that the economy is doing reasonably well. Still, some challenges and opportunities may have led to no change in the decision. “We support the State Bank’s decision,” Aleem concluded. Leaders criticise central bank for ignoring calls for a single-digit rate to revive economy Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh stated that the business community had categorically demanded a substantive reduction of 350 basis points to bring the policy rate down to 7pc to kickstart the economy immediately, as the industry is currently battling an existential crisis due to exorbitant energy tariffs and high borrowing costs. Holding the interest rate would not help move the needle on the cost of doing business, he said, reiterating that the high cost of capital is the primary driver of industrial closures and the inability of Pakistani exporters to compete globally.” If the monetary policy is not aggressively corrected in the following review to reach single digits, the target for export growth and industrial expansion for the fiscal year will remain elusive,” Atif warned. FPCCI Senior Vice President Saquib Fayyaz Magoon said the real interest rate in Pakistan remains unsustainably high compared to regional competitors. Keeping the policy rate at double-digit levels is unjustified given that inflation has receded. This State Bank’s decision would continue to penalise the private sector, restricting access to finance for SMEs and hampering export competitiveness. The SBP has missed a crucial opportunity to align monetary policy with the government’s vision for industrial growth and export facilitation, he added. President of the Korangi Association of Trade and Industry (KATI), Muhammad Ikram Rajput, said in view of the inflation rate and declining exports, there was sufficient room for at least a one-percentage-point reduction in the policy rate. Still, the central bank opted for an overly cautious approach. The decision, he said, appeared to align more with expectations of the International Monetary Fund (IMF) than domestic economic realities, he said, questioning the State Bank’s projected economic growth forecast of 3.75-4.75pc, terming it inconsistent with ground realities. Mr Rajput stressed that sustainable economic growth is not possible without promoting industrialisation. A persistent increase in imports coupled with a decline in exports has put the survival of industries at risk. President of the SITE Association of Industry (SAI), Ahmed Azeem Alvi, said the State Bank Governor himself has acknowledged that exports have declined while imports have risen. This clearly shows that keeping interest rates high has stalled economic progress. He argued that this was the right time to take a chance and reduce the policy rate by at least one to 150bps. Timely decisions could benefit businesses, boost exports, and support overall economic growth. Expressing regret, Mr Alvi noted that Pakistan had failed to learn from regional countries and had not capitalised on opportunities presented by global exhibitions. Pakistan Chemical and Dyes Merchants Association Chairman Salim Valimuhammad said commercial importers warned that the move would further strain businesses and delay economic recovery. “The policy rate should ideally be brought down to 8-9pc,” he said. Published in Dawn, January 27th, 2026