FPCCI warns that high borrowing costs, energy prices and geopolitical uncertainty are squeezing manufacturers and undermining exports and investment.
KARACHI: Pakistan’s business community has reacted sharply to the State Bank of Pakistan’s (SBP) decision to keep the policy rate unchanged at 11.5 per cent, warning that expensive financing could further weaken industrial growth, exports and the country’s economic recovery.
Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh expressed disappointment over the decision, saying trade and industry were desperately seeking relief amid an increasingly difficult business environment.
The apex trade body described the decision as highly contractionary and counterproductive, arguing that keeping the benchmark interest rate at such a high level would continue to suppress economic activity and undermine efforts to revive industrialisation.
Atif Ikram Sheikh said monetary policy was among the few immediate tools available to provide relief to businesses, but the opportunity had been missed.
He said the business community had consistently demanded that the policy rate be reduced to single-digit levels to lower the exceptionally high cost of doing business and encourage investment.
The FPCCI president said the SBP’s cautious monetary stance did not adequately reflect the challenges confronting businesses. He pointed to Pakistan’s trade deficit, which widened by 18.1 per cent year-on-year during July-August 2026, as evidence of mounting pressure on the external sector.
Industry squeezed from every direction
Atif Ikram Sheikh said Pakistan’s industrial sector was facing an existential challenge as businesses grappled with high electricity tariffs, surging petroleum prices, geopolitical and geoeconomic uncertainty and prohibitively expensive financing.
He said manufacturers were struggling to secure the working capital required to keep factories operating, invest in expansion and sustain employment.
“Extreme difficulty in accessing finance has compounded the stagnation confronting the industrial sector,” he said.
The FPCCI chief warned that maintaining elevated borrowing costs would further weaken private-sector credit uptake and could push both small and medium-sized enterprises (SMEs) and large-scale manufacturers away from the formal banking system.
Businesses were increasingly being forced to focus on securing operational liquidity rather than investing in productive capacity, he said.
Expensive money threatens export survival
Atif Ikram Sheikh warned that the high cost of capital was also undermining Pakistan’s export competitiveness.
He said manufacturers could not compete effectively in international markets when financing costs remained substantially higher than those faced by competitors in regional economies.
“Exporters are actively losing their hard-earned global market share to regional competitors that benefit from highly accessible single-digit interest rates,” he said.
According to the FPCCI president, the exorbitant cost of export refinancing was making Pakistani products increasingly uncompetitive, resulting in the loss of export orders and weakening the country’s foreign exchange earnings.
He cautioned that Pakistan’s ambitions for higher exports, industrial expansion and sustainable economic recovery would remain difficult to achieve if monetary and fiscal policies continued to impose heavy costs on the productive sector.
FPCCI calls for urgent policy rethink
Atif Ikram Sheikh urged the SBP to reconsider its monetary policy stance and introduce measures capable of providing immediate support to businesses.
He said a meaningful reduction in the policy rate would lower financing costs, improve access to credit and create room for businesses to invest, expand production and compete in international markets.
The FPCCI president stressed that Pakistan could not achieve sustainable economic growth while its productive sectors remained burdened by high energy prices and expensive bank financing.
He called for coordinated monetary and fiscal measures to restore business confidence, accelerate industrial activity, protect export markets and put the economy on a stronger growth trajectory.