A collective demand from Pakistan’s top industrial and trade associations has emerged ahead of the upcoming Monetary Policy Committee (MPC) meeting, urging the State Bank of Pakistan (SBP) to sharply reduce the policy rate to a range between 5 to 6 percent. Business leaders argue that such a move is essential to realign Pakistan’s interest rate regime with regional economies and to alleviate the escalating cost of doing business, which is increasingly impacting investment and productivity.
President of the Karachi Chamber of Commerce and Industry (KCCI), Muhammad Jawed Bilwani, criticized the current policy rate, stating that borrowing costs in Pakistan remain among the highest in the region, discouraging business expansion and new investment. He drew comparisons with peer economies, noting that Vietnam’s interest rate is 6.3 percent, Cambodia’s is 3 percent, Indonesia’s is 6 percent, and India’s stands at 5.5 percent.
Bilwani further emphasized that beyond interest rates, Pakistan’s industrial competitiveness is being severely hampered by high energy costs. He pointed out that electricity prices in Pakistan average around 16 cents per unit, compared to significantly lower rates in neighboring countries such as Bangladesh (9 cents), Vietnam (8 cents), Cambodia and Indonesia (10 cents), India (7.2 cents), and Sri Lanka (5 cents).
A cut in interest rates to single digits would provide crucial relief to the country’s industrial base, especially small and medium-sized enterprises (SMEs), which bear the brunt of elevated financing costs. Bilwani also highlighted a structural imbalance in credit allocation, with more than 75 percent of domestic credit absorbed by government borrowing, leaving less than a quarter for the private sector. He urged the central bank to take a more proactive stance in correcting this imbalance through monetary easing.
The call for policy rate reduction was echoed by Korangi Association of Trade and Industry President, Junaid Naqi, who pointed to falling inflation, which reached 3.2 percent in June, as evidence that current interest rates are unnecessarily high. “With inflation at this level and the policy rate at 11 percent, there is no economic justification for such a tight monetary stance,” he said.
Naqi warned that industries across the country are operating under capacity, new investments are frozen, and business sentiment is deteriorating rapidly. He added that outdated monetary policies risk exacerbating unemployment and reducing tax revenues at a time when economic revival is urgently needed.
Leaders from other major business associations, including Amaan Pracha and Asif Sakhi of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), Faisal Moiz Khan of the North Karachi Association of Trade and Industry, and Sheikh Mohammad Tahseen of the Federal B Area Association of Trade and Industry, joined in pressing the SBP for immediate interest rate cuts. They stated that lowering interest rates would reduce financial strain on manufacturers, enhance competitiveness, and stimulate broader economic activity.
Zubair Tufail, President of the United Business Group (UBG), advocated for a reduction of 4 to 5 percentage points in the policy rate, stressing that monetary relief is vital for economic resurgence.
Meanwhile, Lasbela Chamber of Commerce and Industry President, Yakoob H. Karim, offered a phased approach, urging the SBP to immediately bring the rate down from 11 percent to 9 percent in the July 30 meeting, with a longer-term goal of reducing it to 5 percent by the end of 2025. He argued that such a trajectory would provide a more sustainable environment for long-term growth and industrial planning.
The unified voice of Pakistan’s business community signals mounting pressure on the central bank to recalibrate its policy in line with ground realities, as inflation slows and growth stagnates. The upcoming monetary policy decision is likely to be a litmus test for the SBP’s commitment to economic revival amid evolving domestic and global conditions.