The SITE Association of Industry (SAI) has voiced strong concern over the State Bank of Pakistan’s recent decision to raise the policy rate by 100 basis points to 11.5 percent. The Association noted that the business community had been anticipating a move toward single-digit interest rates to support economic recovery, making the hike both unexpected and damaging.
President SITE Association, Abdul Rehman Fudda, described the decision as counterproductive to industrial growth and detrimental to already fragile business confidence. “Industry is struggling with high input costs, elevated energy tariffs, weak export performance, and subdued domestic demand. Instead of providing relief, the increase in borrowing costs will further discourage investment and tighten already constrained working capital cycles,” he said.
He stressed that inflationary pressures in Pakistan are primarily driven by supply-side constraints, exchange rate volatility, and administered price adjustments. Aggressive monetary tightening, it warned, risks exacerbating these challenges. “Raising interest rates in such an environment stifles economic activity without delivering meaningful inflation control,” the statement added.
SAI Chief further highlighted the disproportionate impact on small and medium enterprises (SMEs), which are highly sensitive to financing costs. The higher policy rate, it cautioned, will restrict access to credit, delay Balancing, Modernization and Replacement (BMR) projects, and potentially trigger workforce reductions across industrial units.
Mr. Fudda also underscored the negative signal sent to investors, particularly given earlier expectations of monetary easing. “Consistency and predictability in policy direction are critical for long-term investment planning. Sudden shifts of this nature weaken investor confidence,” the statement noted.
Calling for a more balanced and consultative approach, he urged the State Bank to reassess its monetary stance in light of ground realities. It emphasized the need for immediate stakeholder engagement to align policy with the broader objective of sustainable economic growth.
