Business Community Rejects SBP Interest Rate Hike

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has rejected the State Bank of Pakistan’s decision to increase the policy rate by 1 percent, warning that the move could lead to industrial closures and economic stagnation.

FPCCI President Atif Ikram Sheikh expressed serious concern over the decision, calling it ill timed and unfortunate, particularly as the economy was entering a recovery phase after stabilization.

He reiterated that the apex trade body had already cautioned against continued monetary tightening, saying it would deal a severe blow to the country’s struggling industrial and export sectors. Pakistan no longer needs contractionary and regressive monetary or fiscal policies, he added.

The FPCCI chief said a high interest rate environment contradicts the government’s stated goals of economic revival, export growth, and job creation, making Pakistani products less competitive in regional and global markets.

He strongly criticized the rate hike, calling it a harsh setback for the business community. He said the FPCCI had repeatedly shared data with the State Bank and the Ministry of Finance, highlighting that industries cannot survive or expand under such high borrowing costs, especially when competing with regional economies offering much lower rates.

Atif Ikram Sheikh said inflation in Pakistan is largely driven by energy costs and supply chain inefficiencies, and higher interest rates would only increase the cost of doing business, restrict private sector credit, and accelerate de industrialization.

Senior Vice President Saquib Fayyaz Magoon said the decision would disproportionately impact small and medium enterprises, effectively limiting their access to affordable financing.

He added that rising energy tariffs and compliance costs, combined with higher interest rates, could push many manufacturers toward defaults or complete shutdowns, making it difficult to achieve revenue targets.

Vice President and Regional Chairman Sindh Abdul Mohamin Khan said industries in the province are already under pressure, with factories operating below capacity.

He warned that higher interest rates could lead to layoffs, stalled expansions, and canceled orders in the coming months.

The body called on the Prime Minister, Finance Minister, and SBP Governor to reconsider the current monetary policy direction and focus on reducing energy and borrowing costs while expanding the tax base.