Karachi Chamber of Commerce and Industry (KCCI) President Muhammad Rehan Hanif has criticized the State Bank of Pakistan's decision to raise the policy rate by 100 basis points to 11.5%, calling it counterproductive. He warned the hike would drive up borrowing costs for businesses already operating under difficult economic conditions.
Why is KCCI opposed to the SBP interest rate hike?
KCCI argues the rate hike was unwarranted because inflationary pressures, while rising, have not increased by a magnitude that justifies tightening monetary policy. Even before the Middle East conflict escalated, inflation was subdued and manageable. The chamber had repeatedly urged the SBP to bring the rate down to single digits, but those calls were not acted upon.
How will the rate hike affect businesses in Pakistan?
Hanif said the increase would directly raise the cost of doing business, eroding the competitiveness of Pakistani enterprises and discouraging investment and expansion. He argued the SBP had ample room to hold the rate steady rather than increase it. The hike adds pressure on businesses already contending with a challenging economic environment.
How does Pakistan's policy rate compare to regional economies?
Hanif pointed out that several regional economies, despite facing similar external shocks and geopolitical pressures, have kept their policy rates within a single-digit range of roughly 5 to 8 percent to support industrial growth. Pakistan's higher rate places its business and industrial sectors at a distinct competitive disadvantage. He warned that sustained elevated borrowing costs would weaken Pakistan's ability to compete in international markets, where regional rivals continue to benefit from cheaper access to finance.
The KCCI president urged the SBP to revisit its monetary stance and adopt a more balanced, growth-oriented approach aligned with the needs of the business community.
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