Policy rate: business, industrial community expresses disappointment
KARACHI: Business and industrial community have expressed disappointment over keeping police rate at 11 percent.
Atif Ikram Sheikh, President FPCCI, has apprised that the business, industry and trade community of Pakistan is disappointed with the monetary policy as it continues to be based on a heavy premium vis-à-vis Consumer Price Index (CPI) and the State Bank of Pakistan (SBP) has maintained status quo in the policy rate in its Monday meeting.
Atif Ikram Sheikh highlighted that the CPI, as per government's own statistics, stood at 3.50 percent in May 2025; but, the policy rate continues to be 11.0 percent as of today – which reflects a premium of 750 basis points (bps) as compared to inflation and it makes no economic sense, he added.
Atif Ikram Sheikh continued that, after deliberations from the apex trade and industry platform with all industries and sectors, FPCCI had demanded a single-stroke rate cut of 400 basis points during the Monday's monetary policy committee (MPC) meeting to rationalize the key policy rate; and, align it to the vision of special investment facilitation council (SIFC) – and, the Prime Minister's vision for industrial development, import substitution and export growth.
FPCCI Chief noted that the CPI is expected to be in the range of 2 – 4 percent for the months of June – July 2025 as trade, industry and economists' expectations. Therefore, he had demanded, key policy rate should have been brought down to 7 percent with the proposed reduction of 400 bps in today's monetary policy decision.
Sheikh reiterated the apex body's stance that cost of doing business; ease of doing business and access to finance in Pakistan is at the lowest as compared to all its competitors in the export markets. Fortunately, the decisive downward trend in inflationary pressures has been continuing for the past many months; and, the only viable solution to get back on economic growth trajectory is to support industry and exports, he added.
Saquib Fayyaz Magoon, SVP FPCCI, proposed that the interest rate should come down to single digits immediately to enable Pakistani exporters to some extent to compete in the regional and international export markets through reducing the cost of capital in a meaningful way.
President Karachi Chamber of Commerce & Industry (KCCI) Muhammad Jawed Bilwani has expressed profound disappointment over the State Bank of Pakistan's (SBP) decision to maintain the policy rate unchanged at 11 percent, calling it an overly cautious and counterproductive stance in light of easing inflation and deteriorating industrial competitiveness. In a statement issued on Monday, Bilwani stated, 'The business community had pinned hopes on a long-overdue reduction in the interest rate to single digit to help kick-start economic activity, reduce the cost of doing business, and support struggling industries.
By choosing to maintain the status quo, the SBP has not only ignored market signals but has also dampened business sentiment at a time when the economy urgently requires a boost.' He noted that inflation has clearly bottomed out, with independent analysts projecting it to remain between 6 to 7 percent for FY26, while both the IMF and the government estimate it at 7.5 percent.
In light of these forecasts, the decision to maintain the policy rate at a high level of 11 percent appears unjustified. While the State Bank cited the uptick in inflation to 3.5 percent in May as a reason, this rate still remains relatively low and provides ample room for a further reduction in the interest rate; a step that, regrettably, was not taken, he added.
Copyright Business Recorder, 2025
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