Business leaders express dismay over SBP’s rate pause

KARACHI: Business organisations voiced disappointment on Monday after the State Bank of Pakistan kept the policy rate unchanged at 11.5pc, saying lower borrowing costs were needed to support industrial recovery, exports and investment as inflation expectations ease.

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) said maintaining a double-digit policy rate was damaging for the economy. FPCCI President Atif Ikram Sheikh said failure to reduce borrowing costs would speed up de-industrialisation and weaken export targets that are vital for foreign exchange earnings. He also described the central bank’s stance as overly cautious at a time when manufacturers were already facing a cost-of-doing-business crisis.

Referring to expectations of softer inflation after the announcement of a US-Iran peace deal facilitated by Pakistan and the gradual normalisation of global energy supplies, Sheikh said the decision to leave the rate unchanged was regrettable.

"The economy cannot transition to a growth model without a rationalised, single-digit interest rate aligned with domestic realities and the vision of the Special Investment Facilitation Council," he added.

FPCCI Senior Vice President Saquib Fayyaz Magoon said competing regional economies were operating with much lower borrowing costs, making Pakistani exports less competitive in international markets. He said keeping the rate unchanged would further hurt both small and medium-sized enterprises and large-scale manufacturing, limiting expansion and job creation. FPCCI Vice President Abdul Mohamin Khan said the status quo should not be seen as stability and instead risked prolonging economic stagnation. The chamber urged the government and the SBP governor to revisit the approach and implement a meaningful cut at the next Monetary Policy Committee meeting to bring rates into single digits.

Industry bodies seek easing

The Karachi Chamber of Commerce and Industry’s acting president said businesses had expected the central bank to reverse the earlier 100-basis-point increase and bring the rate into single digits in light of improving economic indicators and easing global uncertainty. He said monetary policy should support broader goals of industrialisation, export growth and stronger economic expansion.

Korangi Association of Trade and Industry President Muhammad Ikram Rajput said a reduction in the policy rate was necessary under prevailing economic conditions to support business activity, industrial recovery, investment growth and particularly the small and medium enterprise sector. He said the latest decision could deepen existing pressures on industry, adding that businesses had anticipated a more accommodative stance because of relatively softer inflation and improving economic stability.

Some investors back the move

Not all business groups opposed the decision. Overseas Investors Chamber of Commerce and Industry Secretary General and Chief Executive M. Abdul Aleem described the move as a balanced and pragmatic approach, saying it would give the central bank room to assess the impact of earlier measures without adding further pressure to borrowing costs and investment planning.

He said, however, that keeping the rate steady would need to be accompanied by fiscal discipline, predictable taxation, stronger external buffers, better governance in the energy sector and faster improvements in the ease of doing business if macroeconomic stability was to translate into lasting, private-sector-led growth.

Pakistan Business Council Chairperson Dr Zeelaf Munir also backed the decision, saying the council viewed the unchanged policy rate as a prudent response to current inflation trends and related risks.