Businesses Strongly Denounce SBP Rate Hike

The Federation of Pakistan Chambers of Commerce and Industry has strongly condemned the State Bank of Pakistan's latest decision to raise the policy rate by 0.5 percentage points, bringing it to 12%. The FPCCI's President, Atif Ikram Sheikh, urged the government and central bank to bring interest rates back down to single digits.

Sheikh explained that the hike would increase borrowing costs for businesses that are already grappling with high operating expenses, rising utility tariffs, and liquidity issues. He warned that tighter monetary policy could slow industrial growth, discourage investment, and lower Pakistan's international competitiveness of exports.

Sheikh argued that the high interest rates made borrowing more challenging for manufacturers and commercial enterprises at a time when accessible credit was crucial to maintain operations, generate jobs, and stimulate production. He noted that inflation was primarily caused by supply-side issues, such as rising energy costs and fiscal problems, rather than excessive demand.

In his opinion, higher interest rates would add more strain to productive industries without resolving the root causes of inflation. Sheikh called for the government and central bank to adjust the monetary policy and reduce the policy rate to single digits. He emphasized that lower borrowing costs were vital for small and medium-sized enterprises, traders, and large-scale manufacturers to invest in technology, expand production, and compete with regional businesses.

Sheikh also cautioned that high interest rates increase debt servicing costs for both the government and private borrowers, potentially exacerbating fiscal pressure and constraining economic growth. The FPCCI called on the central bank, federal government, and economic policymakers to embrace a growth-oriented monetary policy, align interest rates with regional standards, and consult the business community before implementing policies that impact economic activity.