Business leaders criticise central bank’s interest rate decision

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KARACHI: The business community on Monday expressed disappointment over the decision to keep the State Bank of Pakistan (SBP) at 11 %, and warned that the move would hinder economic activity and industrial rehabilitation.

The business, industrial and commercial sector has been intimidated that the monetary policy is continuing a significant premium in consumer prices on Monday, with no central bank’s monsoon policy, said Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) (FPCCI).

Referring to official data, he noted that inflation decreased by 3.5 % in May 2025, yet the policy rate is at 11 %, which reflects more than 750 points (BPS) premiums than inflation. Sheikh remarked, “This has no economic meaning.”

He explained that after consulting with stakeholders in all sectors, the FPCCI emphasized the key rate of 400bps at a timely rate of 400bps with the vision of the Prime Minister’s agenda on the Special Investment Facility (SIFC) and the Prime Minister’s Agenda on Industrial Growth, Alternatives and Exports.

Sheikh added that the CPI is likely to be between 2.0 percent and 4.0 percent in June and July, reinforcing the need to reduce the policy rate by 7.0 %. “With access to finances, the cost and ease of doing business, is much lower than our export rivals,” he said. Inflation is moving down from months, and the only viable economic recovery route is to support the industry and exports. “

The President of the Karachi Chamber of Commerce and Industry (KCCI) Mohammad Javed Bulani also criticized the SBP’s decision, calling it excessive cautious and contradictory, especially between the declining inflation and the declining industrial competition.

“The business community was hoping to reduce single digits for a long time to encourage the economy, reduce business spending and support the struggle industry,” he said. Instead, SBP has ignored market indicators and has promoted business sentiment at a time when it is urgent.

Bulani pointed out that inflation has clearly gone out, free predictions have placed it at 6-7 percent for fiscal year 26, while both the IMF and the government expect 7.5 percent. He argued that the decision of the SBP on the basis of May inflation was relatively blazing due to a relatively low low rate and a lot of room to relax the monetary.

He added, “High interest rates have made Pakistan’s industrial sector uncomfortable, exporters have been defeated internationally and domestic manufacturers are struggling against cheap imports. One rate is a key place to recover and create jobs.”

Acknowledging external challenges such as Iran-Israeli conflict and rising oil prices, Bulani stressed that punishing local businesses was not the answer. “Yes, there are external risks, but the financial policy should be balanced,” he said. Financial hardship is already ongoing and with the federal budget of a contraction, there was a place for financial assistance. “

“Today’s decision indicates hesitation when Garbold is needed, pro -development procedures are needed. We urge the central bank to show distant concern and sympathy about the productive sectors. Pakistan can no longer afford to suppress its potential.”

The Korangi Association of Trade and Industry (KATI) also weighed it, demanding a decision to declare the rate 11 % “temporarily acceptable” in view of the current global and regional uncertainty.

Katie President Junaid Naqi cited the geographical political tension, including the Iran -Israeli conflict, and consequently cited the increase in oil prices and trade barriers. He noted that these factors need some caution in policy making. However, Naqi maintained that domestic indicators support a reduction in interest rates. He said, “Inflation has just been 3.5 percent in May – the lowest in the years – globally, when investment in inflation increases, the rates of central banks decrease, but Pakistan has not yet followed it.”

He reaffirmed a permanent demand for the business community’s policy rate to reduce production costs and promote export competition. “Given the current challenges, the business community supports the government’s wider agenda. Naqi has also warned that the recent increase in fuel prices will increase the cost of production by increasing the cost of production.

He pointed out that the government has set a target of 4.2 % in GDP growth for the fiscal year 26, but it will require auxiliary financial environment to achieve it. “Once the global and regional conditions improve, we ask the State Bank to reduce the policy rate by two to three percent points at the next MPC meeting,” he said. Naqi concluded, “We acknowledge that today’s decision has been shaped as global factors,” but we hope that the pro -industry reforms will soon lead to a sustainable growth to ensure that Pakistan’s economy will move. “