SBP's policy rate hike divides business community

The State Bank of Pakistan (SBP) recently increased its policy rate by 50 basis points to 12%, a move that has sparked a division within the business community. While foreign investors welcomed the decision as necessary to combat inflation and maintain macroeconomic stability, many within the industry expressed concerns that the hike could be counterproductive for stabilisation, industrial growth, and export competitiveness.

M. Abdul Aleem, Secretary General of the Overseas Investors Chamber of Commerce and Industry, acknowledged the need for the rate hike, but emphasized that it should be complemented by targeted supply-side reforms, fiscal discipline, and other supportive measures. He urged the government and the SBP to recalibrate the policy rate to make credit more affordable for trade, small and medium-sized enterprises, and large-scale manufacturing.

However, the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) President, Atif Ikram Sheikh, argued that the 12% policy rate would further burden manufacturers already facing high overheads, soaring utility tariffs, and liquidity constraints. He urged for a more accommodating interest rate to support domestic manufacturing and export competitiveness.

The Karachi Chamber of Commerce and Industry (KCCI) President, Talat Mahmood, warned that the rate hike would exacerbate the cost of doing business and discourage private-sector investment, ultimately hindering economic growth. Similarly, the SITE Association of Industry President, Abdul Hadi, stated that the decision would further worsen industry challenges, as factories are operating far below capacity and struggling to survive.

The Business Advisory Council of Karachi Chamber of Commerce and Industry (KCCIC) also weighed in, calling for a single-digit policy rate to facilitate new funding and increase the burden on existing loans. Meanwhile, the Korangi Association of Trade & Industry President, Sheikh Umer Rehan, suggested that addressing energy costs, taxation, and improving the business climate could help curb inflation more effectively than increasing borrowing costs.

The Pakistan Textile Exporters Association Chairman, Rehan Naseem Bharara, noted that the policy rate hike would increase working-capital costs and weaken global competitiveness, especially as the industry already faces expensive energy and financing challenges.