The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has strongly criticized the State Bank of Pakistan’s (SBP) latest decision to increase the benchmark policy rate by 50 basis points to 12%, warning that higher borrowing costs could create additional challenges for businesses across the country.
The leading business body has urged the government and the central bank to reduce interest rates to single-digit levels, arguing that lower borrowing costs are essential to support industrial growth, encourage investment, and improve the competitiveness of Pakistani businesses.
FPCCI President Atif Ikram Sheikh said the latest increase would place further financial pressure on businesses already dealing with high operating expenses, rising utility tariffs, and liquidity constraints.
According to the FPCCI leadership, expensive financing makes it more difficult for companies to secure working capital, expand production facilities, and invest in new equipment. Businesses that rely heavily on bank loans could face increased financial obligations following the policy rate adjustment.
The business community has also expressed concern that tighter monetary policy could slow industrial expansion and discourage both domestic and foreign investment. Higher interest rates can increase the cost of financing new projects, potentially prompting companies to delay expansion plans or reduce planned spending.
Export-oriented industries could face additional challenges if rising financing and production costs make Pakistani products less competitive in international markets. Manufacturers must manage expenses such as electricity, transportation, raw materials, and employee wages while competing with producers from other countries.
The FPCCI has therefore emphasized the importance of monetary policies that consider the financial conditions facing businesses alongside the need to control inflation. Its call for single-digit interest rates reflects the business community’s preference for a lower-cost financing environment that supports production and economic activity.
The SBP recently raised its benchmark policy rate from 11.5% to 12%, citing persistent global energy costs and growing domestic inflation risks linked to the conflict in the Middle East. The central bank said the decision was intended to anchor inflation expectations and limit the spread of higher energy and food prices throughout the economy.
The rate increase came after three consecutive Monetary Policy Committee meetings in which the policy rate remained unchanged. September inflation reportedly reached 10.3%, while core inflation stood at approximately 8.4%, adding to concerns about persistent price pressures.
The disagreement highlights the challenge facing economic policymakers as they seek to balance inflation control with the need to support businesses and economic growth. Higher interest rates can help moderate borrowing and spending, potentially easing demand-driven inflation, but they can also increase financing costs for businesses and consumers.
For industrial companies, particularly those requiring substantial working capital, the cost of credit can influence production levels, employment decisions, and investment plans. Smaller businesses may be especially sensitive to changes in lending costs because they often have fewer financing options.
The FPCCI’s demand for single-digit interest rates places renewed attention on the relationship between monetary policy, private-sector investment, and Pakistan’s economic recovery. Business leaders are seeking measures that can reduce operating pressures while creating conditions for sustainable growth.
However, the future direction of interest rates will depend on the SBP’s assessment of inflation, energy prices, economic activity, and other domestic and international developments. The central bank’s monetary policy decisions will remain important for businesses planning investments, managing debt, and assessing future market conditions.
As debate over the latest rate hike continues, the business community is calling for closer coordination between the government and the central bank to address inflation risks without placing excessive pressure on industrial production, exports, and private-sector investment.