KARACHI: Members of the business community urged the government and the State Bank of Pakistan to cut interest rates to flourish industries, trade and businesses and improve the economy of the country.
They said current 11 percent policy rate no longer justifies with the inflation down to 3.2 percent and GDP growth lagging behind regional economies.
Zubair Tufail, President of United Business Group (UB) called on the State Bank of Pakistan to reduce the policy interest rate to a single digit in the upcoming monetary policy announcement scheduled for July 30.
Tufail warned that persistently high interest rates are severely hurting the industrial and business sectors in Pakistan, pushing them toward a critical breaking point. For several months now, industries have been under immense financial pressure due to the high cost of borrowing, he said. “If the interest rate is not immediately brought down to a single digit, many industries may face closure in the coming weeks — a development that would have devastating consequences for the economy and for low-income communities.”
Tufail emphasised that industries are the backbone of any economy, and their collapse would trigger a chain reaction, increasing unemployment, reducing exports, shrinking tax revenues, and ultimately weakening national economic growth.
He also highlighted the disparity between Pakistan’s interest rates and those of other regional economies. “Pakistan’s interest rate remains unjustifiably high when compared to neighbouring countries,” he noted. “Vietnam’s rate stands at 6.3%, Cambodia’s at 3%, Indonesia’s at 6%, and India’s at 5.5%. In contrast, Pakistan’s industries are struggling with prohibitively expensive borrowing, stalling growth and investment.”
Calling for bold and timely decisions, Tufail urged both the State Bank and the government to recognise the urgency of the situation and take immediate steps to safeguard Pakistan’s economy. “This is a critical moment,” he added. “Reducing the interest rate is not just an economic necessity — it is a strategic imperative for the survival of industry and the livelihood of millions.”
However, Chairman of the Pakistan Vanaspati Manufacturers Association (PVMA), Sheikh Umer Rehan, urged the State Bank of Pakistan to immediately reduce the policy interest rate to 6% in light of improving economic indicators. He stated that the current high interest rate is proving harmful for industrial growth, economic activity, and employment generation.
Rehan said that Pakistan’s current policy rate of 11% remains one of the highest in the region, causing a significant increase in business costs and making it difficult for industries to function smoothly. “At a time when inflation has come down to 3.2%, foreign exchange reserves have crossed $12 billion, and the exchange rate is showing signs of stability, there is a strong basis for lowering the interest rate.”
He pointed out that other regional countries such as India, Bangladesh, and Sri Lanka have kept their interest rates between 6% and 8% to support industrial activity. In contrast, Pakistan’s high rate is limiting industrial recovery and affecting production planning across key sectors.
Rehan highlighted that the edible oil industry, which relies on imported raw materials to meet national needs, is under serious financial strain. With borrowing costs so high, industries are struggling to manage working capital and maintain output levels. He warned that if monetary relief is not provided, it will become increasingly difficult to operate even essential sectors.
He added that a reduction in the interest rate would help industries restore production, manage costs more efficiently, and support national economic goals such as improving exports.
He expressed concern that without action, many small and medium enterprises could face closure, leading to rising unemployment and further economic challenges.
Rehan called for a supportive and industry-oriented financial policy that encourages investment and production. He also urged the government to prioritize essential sectors such as food and health, and to introduce concessional loan schemes to ease financial pressures on manufacturers. “The country needs policies that strengthen real economic activity. Lower interest rates will help revive industries, protect jobs, and stabilize the overall economic environment.”
However, economic and financial analyst Ateeq ur Rehman said there is big demand by the business community to significantly cut the interest rate in the upcoming monetary policy, saying a cut in policy rate will provide breathing space for industrial revival and job creation.
The business community claims that the industries are not supported as such, they could see rising unemployment, declining investment and missed revenue targets. Further, it is imperative that the government and the State Bank of Pakistan should provide immediate relief by cutting down rates to single digit for the revival of industrial activity, and to boost exports and provide relief for country’s macroeconomic fundamentals and estimated saving of Rs. 3.5 trillion annually by reducing the debt servicing burden, said Ateeq ur Rehman.
On the other hand lower interest rates move capital abroad by investors in search of higher returns due to low interest rates, saving accounts, term deposits and government bonds. Low returns reduce motivation to save particularly the younger workers, he said.
The banks should consider the agony and anguishes of their saving account holders, mostly senior citizens, disables, pensioners, endowment funds, etc, he said, adding the reduction in interest rate should not reduce their income of dependency and livelihood. Normally, the reduction in interest rate reduces the income of the depositor and it became very difficult for them to meet the challenges and both the end of the day, all together. In short, reduction in interest rate becomes a curse for them.
This is a great challenge that the monetary policy should bring relief to the economic growth beneficial for industry and business and households.
Copyright Business Recorder, 2025
