President Karachi Chamber of Commerce and Industry (KCCI), Muhammad Rehan Hanif, today voiced profound disappointment and grave concern regarding the State Bank of Pakistan’s (SBP) recent decision to elevate the key policy rate by 100 basis points, pushing it from 10.5 percent to 11.5 percent, warning of significantly higher operating expenses for the business sector.
In a statement, Mr Hanif observed that inflationary pressures in the country were relatively subdued and manageable before the escalation of tensions between the United States and Iran.
While acknowledging some upward movement in inflation following these geopolitical developments, he asserted that the increase was not of such magnitude to necessitate a tightening of monetary policy.
Mr Hanif pointed out that even when inflation was at lower levels, the policy rate remained elevated at 10.5 percent, a figure the business community consistently deemed excessive. KCCI had repeatedly urged the central bank to rationalise the interest rate, advocating for a reduction to single-digit levels, in line with regional benchmarks, but these appeals remained unaddressed.
He further stated that ample scope existed for the State Bank to maintain the status quo in the policy rate under the prevailing circumstances, rather than resorting to an increment.
The KCCI President termed the decision to raise the rate imprudent and counterproductive, cautioning that it would substantially escalate borrowing costs for businesses already contending with challenging economic conditions.
Such a hike, he noted, would inevitably translate into a higher cost of doing business, thereby eroding the competitiveness of Pakistani enterprises and discouraging both investment and expansion initiatives.
Highlighting the regional context, Mr Hanif stressed that monetary authorities must consider the prevailing interest rate trends in rival economies. He observed that several countries in the region, despite facing comparable external shocks and geopolitical uncertainties, have managed to sustain policy rates within a single-digit range, generally between 5 to 8 percent, to foster economic activity and industrial growth.
In contrast, Pakistan’s elevated interest rate regime places its business and industrial sectors at a distinct disadvantage. He warned that sustaining such high borrowing costs would undermine Pakistan’s capacity to compete effectively in international markets, as regional competitors continue to benefit from more affordable access to finance.
Mr Hanif urged the State Bank of Pakistan to reconsider its monetary stance and adopt a more balanced, growth-oriented approach that aligns with the requirements of the business community and supports sustainable economic development.