President of the Korangi Association of Trade and Industry (KATI), Muhammad Ikram Rajput expressed strong reservations over the State Bank of Pakistan’s Monetary Policy Committee decision to maintain the policy rate at 10.5%, calling it contrary to the demands of the business community and prevailing economic indicators.
Rajput said that with inflation holding at 7.4% and exports declining by 6% on an annual basis, there was sufficient room for at least a one-percentage-point reduction in the policy rate. “The business community and macroeconomic indicators were clearly pointing towards a rate cut, but the central bank opted for an overly cautious approach,” he said, adding that the decision appeared to align more with expectations of the International Monetary Fund (IMF) than domestic economic realities.
KATI President also questioned the State Bank’s projected economic growth forecast of 3.75% to 4.75%, terming it inconsistent with ground realities. He stressed that sustainable economic growth is not possible without the promotion of industrialisation.
Rajput warned that a persistent increase in imports coupled with a decline in exports has put the survival of industries at risk. “Affordable financing was essential to pull industry out of its current difficulties,” he said, reiterating that bringing the interest rate down to single digits was crucial to accelerate economic growth.
He described the central bank’s decision as being completely at odds with industry expectations and said it would fail to provide relief to industries already burdened by high production costs. “Inflation has declined significantly, yet industry has not been given the relief it urgently needs,” he added.
KATI President further pointed out that Pakistan’s policy rate remains significantly higher than those of other countries in the region, particularly its trade competitors, severely undermining export competitiveness. He said the high cost of borrowing has rendered investment in new industrial units and expansion of existing facilities almost unviable.
According to Rajput, elevated interest rates have also made access to finance nearly impossible for small and medium-sized enterprises (SMEs), which form the backbone of the national economy and employment generation. As a result of rising investment costs and higher production expenses, the export sector is under intense pressure, he added.
Urging the government and the State Bank to acknowledge economic realities, Rajput called for an immediate reduction of the policy rate to single digits. “This is essential to steer the country out of economic distress, promote industrial growth and create employment opportunities, ensuring that the industrial wheel continues to move without disruption,” he concluded.
