KARACHI, April 27– The Karachi Chamber of Commerce and Industry (KCCI) on Monday sharply criticized the State Bank of Pakistan (SBP) for raising the benchmark policy rate by 100 basis points to 11.5%, warning that the move could hurt business activity and economic growth.
KCCI President Muhammad Rehan Hanif expressed concern over the decision, calling it “imprudent and counterproductive” at a time when businesses are already grappling with economic challenges.
In a statement, Hanif said that prior to the escalation in tensions between the United States and Iran, inflation in Pakistan had remained relatively contained and manageable. While acknowledging some recent uptick in prices, he argued that the increase did not justify a tightening of monetary policy.
“Even when inflation was lower, the policy rate remained elevated at 10.5%, which the business community consistently termed excessive,” he said, adding that repeated calls to bring rates down to single-digit levels had gone unheeded.
Concerns over rising borrowing costs
Hanif warned that the rate hike would significantly increase the cost of borrowing, making it more expensive for businesses to finance operations, expand capacity and invest in new projects.
“The decision will raise the cost of doing business and erode the competitiveness of Pakistani enterprises,” he said, noting that higher financing costs could dampen industrial output and discourage investment.
He added that the move could further strain small and medium-sized enterprises (SMEs), which are particularly sensitive to interest rate changes.
Regional competitiveness at risk
Highlighting the regional context, Hanif said several competing economies have maintained lower policy rates, generally ranging between 5% and 8%, despite facing similar global challenges.
In contrast, Pakistan’s higher interest rate environment places its industries at a disadvantage in international markets, where competitors benefit from cheaper access to capital.
Call for policy rethink
The KCCI urged the central bank to reconsider its monetary stance and adopt a more balanced approach that supports growth while managing inflation.
Hanif emphasized that aligning monetary policy with the needs of the business community is essential for sustaining economic momentum and improving export competitiveness.
The SBP’s latest rate hike comes amid rising global uncertainties and inflation risks, but business leaders warn that prolonged tight monetary conditions could slow Pakistan’s fragile economic recovery.