The Korangi Association of Trade and Industry (KATI) has termed the State Bank of Pakistan’s decision to maintain the policy rate at 11% as temporarily acceptable given the prevailing global and regional challenges. KATI President Junaid Naqi stated that the ongoing geopolitical tensions in the region, including the Iran-Israel conflict in the Middle East, have triggered a sudden surge in global oil prices. Additionally, the closure of airspace by several countries has disrupted international trade and supply chains, creating an environment of uncertainty that calls for cautious economic measures.
However, Naqi emphasized that domestic economic indicators suggest Pakistan’s economy is now ready for a reduction in interest rates. “Inflation fell to just 3.5% in May—the lowest level in years. Globally, when inflation decreases, interest rates are reduced to encourage investment and industrial activity, yet Pakistan has yet to reflect this trend,” he said.
Naqi highlighted that the business community has consistently demanded that the policy rate be brought into single digits to reduce production costs and make Pakistani exports more competitive in international markets. “Given the current global and national challenges, the business community stands firmly with the government and supports measures taken in the national interest,” he added. “We accept the central bank’s decision in light of these extraordinary circumstances but expect industry-friendly reforms once the situation stabilizes.”
The KATI president also pointed to the recent increase in petroleum product prices, warning that this will further burden the industrial sector and escalate production costs.
He noted that the government has set a GDP growth target of 4.2% for FY26, but achieving this goal is contingent on providing a conducive financial environment for industry, the backbone of the economy. “As soon as global and regional conditions improve, we urge the State Bank to reduce the policy rate by at least 2 to 3 percentage points in the next monetary policy to foster industrial growth and stabilize the national economy.”
“We recognize that global challenges shape the current decision,” Naqi concluded, “but we remain optimistic that the government will soon implement pro-industry policies to ensure Pakistan’s industry and economy move steadily toward sustainable growth.”
