Business Leaders Criticise SBP Policy Rate Decision

Business leaders have expressed concern over the decision of the State Bank of Pakistan to maintain the benchmark policy rate at 10.5 percent, stating that the move may limit prospects for industrial recovery and export expansion at a time when manufacturers are already facing elevated energy costs and disruptions in regional trade.

Representatives from various industry associations indicated that the business community had anticipated a reduction in the interest rate to lower financing expenses for businesses. According to them, the decision to keep the policy rate unchanged may discourage borrowing and reduce incentives for investment by industrial enterprises.

Industry stakeholders stated that manufacturers are already operating under increased production costs due to higher electricity and gas tariffs. They noted that the prevailing cost of borrowing under the current policy rate further constrains the ability of firms to expand capacity, invest in new projects, or increase production levels.

Business representatives also referred to recent trade data showing a decline in exports alongside an increase in imports, describing the trend as an indicator of weakening economic momentum. Some industry leaders suggested that a policy rate reduction of approximately 100 to 150 basis points could have offered meaningful relief to the private sector and encouraged additional investment.

They further stated that bringing the policy rate into single-digit territory could enable exporters to access bank financing at lower costs, potentially helping them increase output and improve competitiveness in international markets.

Separately, a representative of the Overseas Investors Chambers of Commerce and Industry noted that the decision to maintain the policy rate was somewhat unexpected, as some investors had anticipated the possibility of a rate increase amid ongoing regional tensions.

Business leaders also urged the government to prepare contingency measures aimed at mitigating economic risks arising from the evolving conflict in the Middle East. According to them, rising petroleum prices and higher borrowing costs may increase operational expenditures for manufacturers, which could adversely affect industrial activity and export performance.