Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI), expressed profound disappointment over the State Bank of Pakistan’s decision to maintain the key policy rate at 10.5%. FPCCI has termed this decision as counterproductive and strictly disappointing given the industrial revival Pakistan urgently needs.
Mr. Ikram Sheikh, in his statement, highlighted that the business community had consistently demanded a substantive reduction of 3.5%, or 350 basis points, to bring the policy rate down to 7%. He emphasized that FPCCI’s concerns are grounded in current economic realities: core inflation has stabilized at around 5% over recent months and major indicators signal a need for growth.
FPCCI Chief further explained that the SBP’s cautious approach is perplexing given these conditions. Mr. Ikram Sheikh reiterated that the industry currently faces an existential crisis due to exorbitant energy tariffs and high borrowing costs. The proposed status quo will not help mitigate these issues, as access to finance remains constrained for the sector.
The industry leader stressed that a shock therapy of a 3.5% cut was required to stimulate economic activity; instead, they received a decision that is unlikely to make a meaningful difference. Mr. Ikram Sheikh warned that without aggressive monetary corrections in the next review period, achieving export growth targets and industrial expansion for the fiscal year remains elusive.
The FPCCI President outlined their demands for an immediate review of the monetary stance aligning interest rates with single-digit inflation figures. They proposed a clear roadmap for the SBP to reduce the policy rate to 7% and declared an “Industrial Emergency” to prevent manufacturing units from shutting down due to high costs associated with inputs and finance.
Senior Vice President Saquib Fayyaz Magoon of FPCCI underscored the discrepancy between the policy rate and inflation rates. He noted that Pakistan’s real interest rate remains unsustainably high compared to regional competitors. Mr. Fayyaz Magoon also pointed out that, when inflation has retreated, keeping the policy rate at double digits is unjustified. This decision continues to penalize the private sector, restricts access to finance for small and medium enterprises (SMEs), and hampers export competitiveness.
Brigadier Iftikhar Opel, Secretary General of FPCCI, added that the SBP missed a crucial opportunity by not aligning monetary policy with the government’s vision for industrial growth and export facilitation.