Businesses criticise SBP decision to keep policy rate at 10.5%

Business leaders have criticised the State Bank of Pakistan’s decision to keep the policy rate unchanged at 10.5%, saying the move will not support industrial revival or export growth at a time when manufacturers are already facing high energy costs and regional trade disruptions.

Representatives of industry associations said businesses had expected a reduction in the interest rate to ease financing costs. They argued that maintaining the rate at current levels could discourage borrowing and investment by manufacturers.

Industry representatives said companies are already dealing with higher production costs due to electricity and gas tariffs. They said the cost of financing under the current policy rate makes it more difficult for firms to expand operations or increase output.

They also pointed to recent trends showing exports declining while imports have increased, describing the situation as a sign of slowing economic activity. Some industry leaders said a cut of 100 to 150 basis points could have provided relief to the business community and encouraged investment.

They added that a single-digit policy rate would allow exporters to obtain cheaper bank financing, potentially helping them increase production and improve competitiveness in international markets.

Separately, a representative of the Overseas Investors Chambers of Commerce and Industry said the decision to keep the policy rate unchanged was unexpected because some investors had anticipated a rate increase amid tensions in the region.

Business leaders also called on the government to consider contingency measures to manage economic risks linked to the conflict in the Middle East. They said rising petroleum prices and borrowing costs could increase operational expenses for manufacturers, affecting industrial activity and exports.