SBP Holds Rate At 11.5% As Business Groups Split Over Decision

The State Bank of Pakistan’s decision to maintain the policy rate at 11.5% has drawn mixed reactions from the country’s business community. While some industry groups believe that expensive financing is restricting investment and delaying industrial recovery, others consider the decision necessary to preserve economic stability amid inflation and rising global commodity prices.

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) criticised the Monetary Policy Committee’s decision, saying that businesses needed relief in an economy facing prolonged stagnation risks.

The country’s leading trade body described the unchanged interest rate as highly contractionary and counterproductive. It warned that retaining the benchmark rate at its current level would continue to suppress economic activity and weaken efforts to revive industrial growth.

FPCCI President Atif Ikram Sheikh said the business community had called for the policy rate to be brought down to single digits to reduce the cost of doing business. He argued that the central bank’s cautious stance failed to reflect current economic conditions, highlighting an 18.1% year-on-year rise in Pakistan’s trade deficit during July-August 2026.

Sheikh added that industrial activity was being affected by high energy tariffs, increasing petroleum prices, geo-economic uncertainty and elevated borrowing costs, all of which were contributing to sluggish industrialisation.

Muhammad Ikram Rajput, president of the Korangi Association of Trade and Industry (KATI), also maintained that high interest rates were restricting industrial recovery, discouraging fresh investment and placing pressure on the export sector.

In contrast, the Overseas Investors Chamber of Commerce and Industry (OICCI) welcomed the decision to hold the policy rate at 11.5%, calling it a cautious and balanced response to the prevailing economic environment.

The OICCI said elevated headline and core inflation justified a careful approach. It added that stronger foreign exchange reserves, healthy remittance inflows and an uneven industrial recovery supported the decision not to introduce further monetary tightening.

According to the chamber, maintaining the current rate offers businesses greater policy predictability and some scope for investment planning. However, it stressed that a policy-rate pause must be accompanied by structural reforms.

The OICCI urged the government to improve fiscal discipline, reduce energy costs, ensure greater tax predictability, accelerate tax refunds and advance ease-of-doing-business reforms so that macroeconomic stability could translate into stronger competitiveness and investment.

The Rawalpindi Chamber of Commerce and Industry (RCCI) also supported the MPC’s decision, citing international inflationary pressures linked to the Middle East conflict involving Iran and the resulting increase in global energy and commodity prices.

RCCI President Usman Shaukat noted that Pakistan, as a net importer of fuel, remained particularly vulnerable to external price shocks.

He said that maintaining a stable monetary policy in such circumstances would help protect the economic stability achieved through significant efforts over the past two years.