Karachi: Business leaders have criticised the State Bank of Pakistan’s decision to keep the policy rate unchanged at 11.5%, arguing that expensive financing is making it increasingly difficult for businesses and industries to secure the working capital needed to sustain operations.
Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), expressed disappointment over the decision, saying trade and industry needed greater breathing space amid an economic environment vulnerable to stagnation.
FPCCI Calls Policy Rate Decision Contractionary
The apex trade body described the decision to maintain the benchmark rate at 11.5% as highly contractionary and counterproductive.
Sheikh argued that keeping borrowing costs elevated would continue to constrain economic activity and undermine efforts to revive industrial growth across the country.
According to him, monetary policy remains one of the most effective tools available to policymakers for providing relief to businesses, but the latest decision did not utilise that opportunity.
Business Community Demands Single-Digit Interest Rates
The FPCCI president said the business community had called for the policy rate to be brought into single digits to reduce the cost of doing business.
He said the central bank’s cautious approach does not adequately reflect the challenges facing businesses, particularly as Pakistan’s trade deficit increased by 18.1% year-on-year during July-August 2026.
The combination of high financing costs and a widening external trade gap, he argued, could further complicate efforts to strengthen economic activity.
High Energy and Financing Costs Squeeze Industry
Pakistan’s manufacturing sector is facing pressure from multiple directions, including elevated energy tariffs, rising petroleum prices, geopolitical and geoeconomic uncertainty and expensive bank financing.
Sheikh said these pressures were contributing to stagnating industrialisation and making it harder for businesses to plan new investments or expand existing operations.
He particularly highlighted the difficulty manufacturers face in securing sufficient capital to maintain day-to-day operations.
Limited Access to Credit Hurts Businesses
The FPCCI chief warned that the continued high cost of borrowing could weaken private-sector credit uptake.
According to him, restricted access to formal financing risks pushing both small and medium-sized enterprises (SMEs) and large-scale manufacturers out of the formal credit market.
For businesses already dealing with rising input and energy costs, the lack of affordable working capital can create serious operational liquidity challenges.
Expensive Financing Threatens Export Competitiveness
Sheikh also linked the high cost of capital to Pakistan’s export challenges.
He argued that manufacturers are struggling to keep their production costs competitive in international markets because financing and export refinancing remain expensive.
Pakistani exporters are increasingly competing against regional businesses that have access to more affordable, single-digit interest rates. According to the FPCCI president, this cost disadvantage can contribute to lost export orders and weaker foreign exchange earnings.
FPCCI Urges SBP to Reconsider Its Stance
The FPCCI president warned that Pakistan’s export growth and economic recovery targets could remain difficult to achieve under prevailing monetary and fiscal conditions.
He urged the State Bank of Pakistan to reconsider its current policy stance and introduce measures aimed at supporting business continuity, improving access to financing and creating more favourable conditions for industrial activity.
The business community’s criticism adds pressure on policymakers to balance inflation management with the need to revive private investment, manufacturing and exports.