Pakistan’s business community has expressed mixed views on the State Bank of Pakistan’s decision to raise the policy rate to 12 per cent, with some industry representatives acknowledging the need to control inflation while others warn that higher borrowing costs could undermine investment, manufacturing and economic recovery.
M. Abdul Aleem, secretary general of the Overseas Investors Chamber of Commerce and Industry (OICCI), supported the central bank’s decision, saying it was necessary to manage inflationary pressures and maintain macroeconomic stability amid risks arising from global energy prices.
However, he stressed that sustaining economic momentum was equally important, noting that large-scale manufacturing growth had recovered to 1.9 per cent during July-August FY26, while private-sector credit had expanded by 14.1 per cent year-on-year.
Aleem said inflation was being driven significantly by external energy costs and domestic supply constraints. He emphasised that monetary tightening should therefore be accompanied by targeted supply-side reforms, fiscal discipline, competitive energy tariffs, a broader tax base and consistent taxation and regulatory policies.
In contrast, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh criticised the increase, describing the 12pc policy rate as uncompetitive and warning that it would further raise financing costs for manufacturers already facing high operating expenses, expensive utilities and liquidity shortages.
Sheikh argued that inflation was largely linked to supply-side bottlenecks, energy prices and fiscal weaknesses rather than excessive consumer demand. He maintained that tight monetary policy was placing additional pressure on domestic manufacturing without addressing the underlying causes of rising prices.
He urged the government and the State Bank to reconsider the current policy and reduce the interest rate to single digits to make financing more affordable for traders, small and medium-sized enterprises (SMEs) and large-scale industries.
According to Sheikh, elevated interest rates also increase debt-servicing costs for the government and private borrowers, adding to fiscal pressure and limiting industrial output. He called for interest rates to be brought closer to regional benchmarks.
Karachi Chamber of Commerce and Industry (KCCI) President Talat Mahmood also warned that the rate increase would raise business costs, discourage private investment and weaken economic growth.
He said Pakistan needed to expand productive capacity, attract fresh investment, create employment opportunities and accelerate export-led growth. However, he cautioned that higher borrowing costs could discourage businesses from investing in new projects or expanding existing operations.
SITE Association of Industry President Abdul Hadi said the decision would intensify the difficulties facing industrial units, many of which were already operating significantly below capacity and struggling to remain financially viable.
He said the business community had repeatedly called for a single-digit policy rate, but the sector’s key concerns continued to be overlooked. Higher interest rates, he added, would make new financing more expensive while increasing repayment obligations on existing loans.
Hadi warned that costly credit could force formal businesses to reduce operations or shut down, as manufacturers faced mounting pressure on investment, production and expansion plans.
Korangi Association of Trade and Industry President Sheikh Umer Rehan also expressed concern that the increase could hinder industrial activity, business expansion and the broader economic recovery.
He argued that inflation could also be addressed through lower energy costs, improved taxation, a more supportive business environment and effective industrial policies.
Meanwhile, Pakistan Textile Exporters Association Chairman Rehan Naseem Bharara said the higher policy rate would increase working-capital expenses, restrict investment and weaken the international competitiveness of textile exporters.
He noted that the industry was already struggling with high energy prices and expensive financing, warning that the latest increase could further complicate efforts to sustain production and strengthen exports.
