As Pakistan prepares for the State Bank of Pakistan’s last Monetary Policy Committee meeting of 2025 on Monday, leading industrialists have called for a decisive reduction in interest rates to stimulate economic activity. With inflation relatively under control, the Pakistani rupee holding steady, and foreign reserves exceeding targets, business leaders argue that a policy rate cut is necessary to revive stalled industrial growth.
Musadaq Zulqarnain, CEO of Interloop Limited, one of Pakistan’s largest textile firms, said in a statement on social media that a 100 basis points reduction in the policy rate is now warranted. He highlighted that the country’s growth engine is stalling and industry is under severe stress, stressing that a timely reduction in rates could not only boost business activity but also ease the government’s fiscal burden.
Former caretaker Federal Minister for Commerce, Gohar Ejaz, echoed these concerns, noting that Pakistan has achieved less than 2% aggregate growth over the past 36 months. He pointed out that the exchange rate has deteriorated significantly, moving from Rs160 to Rs280 per US dollar, while exports have remained stagnant at around $30 billion. According to him, devaluation alone is insufficient to make exports competitive.
Gohar also highlighted that Pakistan’s interest rates are nearly double those of regional peers like China and India. He emphasized that the SBP has maintained the policy rate at 11% for most of the year, with only a minor reduction of one percentage point over 12 months. This has kept average real interest rates above 6%, eroding industrial competitiveness and suppressing economic growth. He recommended lowering the policy rate to around 6% and reducing real rates to 1% within the next six months to align with regional benchmarks, which would also decrease government debt servicing by approximately Rs3 trillion annually.
The SBP has held its policy rate at 11% since September, following a cumulative reduction of 1,100 basis points between June 2024 and May 2025, as inflation eased sharply from highs near 40% in 2023. However, inflation has recently accelerated due to rising food and transport costs and fading base effects. Headline inflation stood at 6.1% in November, slightly down from 6.2% in October, but still within the SBP’s 5–7% target range.
The IMF, in its second review released on Thursday, stressed that Pakistan’s monetary policy should remain “appropriately tight and data-dependent” to anchor expectations. The Fund noted that the SBP has maintained positive real interest rates on a forward-looking basis and that its tight stance has been pivotal in reducing inflation and supporting the rebuilding of external buffers.
The coming MPC meeting will be closely watched by industrialists and investors alike, as any adjustment in policy rates could have significant implications for Pakistan’s growth trajectory, industrial competitiveness, and fiscal health.
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