KARACHI: The business community in Pakistan expressed disappointment over the central bank’s decision to keep the policy rate unchanged at 11%, arguing that it had undermined business sentiment and posed challenges for industrialists, entrepreneurs, and investors.
The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Wednesday decided to keep the policy rate unchanged at 11%, a decision that contradicted market expectations, which had anticipated a rate cut of around 50 to 100 basis points (bps).
“Consumer price index (CPI), as per government’s own statistics, stood at 3.2% in June 2025; but, the policy rate continues to be 11% as of today – which reflects a premium of 780 basis points (bps) as compared to inflation and it makes no economic sense,” Federation of Pakistan Chambers of Commerce & Industry (FPCCI) president Atif Ikram Sheikh said in a statement.
Sheikh lamented that after deliberations from the apex trade and industry platform with all industries and sectors, FPCCI had demanded a single-stroke rate cut of 500 basis points during the Wednesday’s MPC meeting to rationalise the key policy rate.
Pakistan Hosiery Manufacturers and Exporters Association’s (PHMA) central chairman Muhammad Babar Khan said maintaining the key interest rate at 11% would hurt the growth of exporters and manufacturers of different sectors.
“The policy rate maintains a higher level in the region which made its extremely challenging for exporters to further enhance their exports or compete with different countries such as Vietnam, Bangladesh, and India,” Khan said.
Here is how much key interest rate has moved in last 12 months
Pakistan Chemicals & Dyes Merchants Association (PCDMA) chairman Salim Valimuhammad also labeled the SBP decision a setback for business sentiment and industrial growth.
In a statement, he argued that lower interest rates were critical to stimulating economic activity, improving access to affordable loans, and fostering job creation.
“This is not a wise decision in my view,” he stated, pointing to the recent decline in inflation as a reason to cut rates. “Inflation has already come down, and businesses are under enormous pressure. If such high interest rates continue, it will further burden the business community, which is already struggling.”
Pakistan’s headline inflation clocked in at 3.2% on a year-on-year (YoY) basis in June 2025, a reading lower than that of May 2025, when it had stood at 3.5%, according to Pakistan Bureau of Statistics (PBS) data.
On month-on-month (MoM) basis, it increased by 0.2% in June 2025, as compared to a decrease of 0.2% in the previous month and an increase of 0.5% in June 2024. CPI inflation average during FY25 stood at 4.49% as compared to 23.41% in FY24.
“On one hand, the government claims inflation is decreasing, but on the other hand, the interest rate remains unchanged. This policy inconsistency is damaging economic recovery,” PCDMA chairman said.
Karachi Chamber of Commerce & Industry (KCCI) president Muhammad Jawed Bilwani said even with inflation at its current level or marginally higher, there remained sufficient room to reduce the interest rate to a single digit, as “many regional economies have done in similar or even more complex economic environments”.
“By missing this critical opportunity to lower rates, the State Bank has not only dampened hopes for economic revival but also imposed a continued and unnecessary burden on an already strained private sector”, he said, adding the SBP decision was not only detrimental to domestic businesses, particularly small and medium enterprises (SMEs) and manufacturers, but “also risks further stifling economic recovery, employment generation, and industrial revival”.
He pointed out that across the region and in comparable economies, monetary policy easing was actively being pursued to support growth.
“For instance, India’s policy rate stands at 6.5%, Bangladesh around 8.5%, Indonesia at 6.25%, while Vietnam has brought its rate down to below 5%, all significantly lower than Pakistan’s,” Bilwani said.
Meanwhile, the Economic Policy & Business Development (EPBD) think tank termed the SBP decision “very conservative”.
EPBD chairman Gohar Ejaz said the Federal Board of Revenue (FBR) had set a target of an 18% increase in tax collection, but the monetary policy was stifling tax-paying business activities.
He demanded that the interest rate should be immediately reduced to 9% and brought down to 6% by December 31, 2025.
“Pakistan has strong potential in manufacturing and exports, but the monetary policy is blocking economic growth,” Ejaz said.
