President Karachi Chamber of Commerce and Industry (KCCI), Muhammad Rehan Hanif has expressed sheer disappointment and serious concern over State Bank’s decision to increase the key policy rate by 100 basis points, raising it from 10.5 percent to 11.5 percent. In a statement issued, Rehan Hanif observed that prior to the escalation in tensions between the United States and Iran, inflationary pressures in Pakistan were relatively subdued and well within a manageable range.
While acknowledging that inflation has experienced some upward movement following the geopolitical developments, he emphasized that the increase has not been of such magnitude as to warrant a tightening of monetary policy. He pointed out that even when inflation was on the lower side, the policy rate remained elevated at 10.5 percent, which the business community had consistently termed excessive. KCCI had repeatedly urged the central bank to rationalize the interest rate and bring it down to single-digit levels in line with regional benchmarks, but these appeals were not given due consideration.
Rehan Hanif further stated that under the prevailing circumstances, there was ample room for the State Bank to maintain the status quo in the policy rate rather than resorting to an increase. He termed the decision to raise the rate as imprudent and counterproductive, cautioning that it would significantly escalate the cost of borrowing for businesses already operating under challenging economic conditions. The hike, he noted, would inevitably translate into a higher cost of doing business, thereby eroding the competitiveness of Pakistani enterprises and discouraging investment and expansion.
Highlighting the regional context, President KCCI stressed that monetary authorities must take into account the prevailing interest rate trends in competing economies. He noted that several countries in the region, despite facing similar external shocks and geopolitical uncertainties, have managed to maintain policy rates within a single-digit range, generally between 5 to 8 percent, to support economic activity and industrial growth. In contrast, Pakistan’s higher interest rate regime places its business and industrial sectors at a distinct disadvantage.
He warned that sustaining such elevated borrowing costs would undermine Pakistan’s ability to compete effectively in international markets, as regional competitors continue to benefit from cheaper access to finance. Rehan Hanif urged the State Bank of Pakistan to revisit its monetary stance and adopt a more balanced, growth-oriented approach that aligns with the needs of the business community and supports sustainable economic development.
