Trade bodies say interest rate hike to hit industry, economy

Pakistan’s trade bodies rejected the increase of 100 basis points in the key policy rate by the State Bank of Pakistan (SBP) to 11. 5% on Monday, expressing their disappointment over the central bank move and saying the decision would badly impact economic activities and might result in closure of industrial units and factories in the country. Federation of Pakistan Chambers of Commerce & Industry (FPCCI) president Atif Ikram Sheikh in a press statement said, “It [the rate-hike decision] is ill-timed and unfortunate as the country’s economy was on a take-off stage after the stabilisation phase”. FPCCI chief pointed out that a high-interest-rate environment fundamentally contradicts the government’s stated goals of economic revitalisation, export growth and job creation – rendering Pakistani products uncompetitive in the regional and international markets. FPCCI senior vice president Saquib Fayyaz Magoon envisaged disproportionate impact of the decision on small and medium enterprises (SMEs). “Today’s decision will essentially shut the door on affordable access to finance for SMEs. ” “It is impossible to achieve the Federal Board of Revenue’s ambitious revenue targets when you are actively stifling the very engines of production, ” he added. Karachi Chamber of Commerce and Industry (KCCI) president Muhammad Rehan Hanif maintained that there was ample room for the State Bank to maintain the status quo in the policy rate rather than resorting to an increase. He termed the decision to raise the rate as imprudent and counterproductive, cautioning that it would significantly escalate the cost of borrowing for businesses already operating under challenging economic conditions. The hike, he noted, would inevitably translate into a higher cost of doing business, thereby eroding the competitiveness of Pakistani enterprises and discouraging investment and expansion. Korangi Association of Trade and Industry (KATI) president Muhammad Ikram Rajput said Pakistan economy had already been under recovery pressure due to international tensions and the Iran-US conflict. Also read: SBP foresees moderation in economic activities in FY26, FY27 He added that industry urgently needed access to cheaper financing. Higher interest rates slow investment, discourage new industrial projects and restrict access to finance for small and medium-sized enterprises, Rajput said. He was of the view that inflation cannot be controlled through interest rate hikes alone, and that supply-side reforms, lower energy costs and an improved business environment are also essential.

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