Korangi Association of Trade and Industry (KATI) President Muhammad Ikram Rajput has expressed disappointment over the State Bank of Pakistan’s Monetary Policy Committee decision to raise the policy rate from 10.5% to 11.5%, saying the move will negatively affect industrial activity and increase the cost of doing business.
Rajput said the 100-basis-point increase appears to have been made in view of inflationary pressures, the current account situation, and external financial challenges. Still, under the present circumstances, it will only add to the difficulties facing industry.
He noted that inflation has been declining and is now moving closer to t%, but higher interest rates will make borrowing more expensive for the business community. This, he said, will push up production costs and directly impact product prices and export competitiveness. “The Pakistani economy is already under recovery pressure due to international tensions and the Iran-US conflict,” Rajput said, adding that industry urgently needs access to cheaper financing. He said higher interest rates slow investment, discourage new industrial projects and restrict access to finance for small and medium-sized enterprises.
The KATI president further said many economies around the world are adopting softer monetary policies to support growth, while Pakistan’s elevated rates could become a barrier to industrial expansion. He stressed that inflation cannot be controlled through interest rate hikes alone, and that supply-side reforms, lower energy costs and an improved business environment are also essential. He said current inflationary pressures are being driven by high energy prices, taxes, and import costs, all of which have become more expensive because of the war, and can be addressed more effectively through administrative and policy measures rather than monetary tools.
Rajput urged the State Bank to consider industry’s needs in future monetary policy decisions and to bring interest rates down to a lower level so that investment, exports, and employment opportunities can be promoted and the economy can move toward sustainable stability.
