Business leader says Pakistan’s high benchmark interest rate is constraining investment, industrial growth and job creation
KARACHI: Khurram Ijaz, Secretary General of the Businessmen Panel Progressive (BMPP) and former Vice President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has expressed concern over Pakistan maintaining one of the world’s highest benchmark interest rates and urged the State Bank of Pakistan (SBP) to announce a substantial reduction in the policy rate at its upcoming Monetary Policy Committee (MPC) meeting on July 27, 2026.
Khurram Ijaz said that although the SBP has lowered its benchmark policy rate from a record 22% in December 2023 to 11.5%, the current rate remains excessively high compared with most regional and global economies, making borrowing expensive for businesses and discouraging private-sector investment.
Referring to the Economic Survey of Pakistan 2025-26, he noted that Pakistan continues to rank among the countries with the highest policy interest rates globally.
According to the survey, only Türkiye (37%), Brazil (14.5%) and Russia (14.5%) maintain higher benchmark rates than Pakistan, whose policy rate currently stands at 11.5%.
Khurram Ijaz highlighted that policy rates in most advanced economies remain considerably lower, with the United States at 3.63%, the United Kingdom at 3.75%, the Euro Area at 2.0%, Canada at 2.25%, Japan at 0.75%, and Australia at 4.1%.
He added that major Asian economies also maintain more accommodative monetary policies, with China at 3.0%, India at 5.25%, Malaysia at 2.75%, Indonesia at 4.75%, South Korea at 2.5%, and Thailand at 1.0%. Regional economies including Saudi Arabia (4.25%) and Morocco (2.25%) also operate with significantly lower benchmark rates.
Khurram Ijaz said Pakistan’s elevated borrowing costs have become one of the biggest obstacles to economic recovery and industrial expansion.
“Businesses cannot expand when the cost of borrowing remains among the highest in the world,” he said. “The private sector requires affordable financing to invest in new projects, modernise industries, increase exports and create employment opportunities.”
He argued that prolonged high interest rates have adversely affected manufacturing, exports, construction, housing, real estate, agriculture and small and medium-sized enterprises (SMEs).
According to him, expensive financing has discouraged fresh investment, reduced production capacity and weakened the competitiveness of Pakistani exporters in international markets.
“The manufacturing sector is struggling with rising financing costs, while SMEs—the backbone of our economy—are finding it increasingly difficult to obtain affordable working capital. As a result, expansion plans have been delayed, industrial output has slowed and employment generation has suffered,” he added.
Khurram Ijaz said the construction and housing sectors have also experienced slower activity because higher financing costs have reduced demand for mortgages and commercial loans.
He noted that this slowdown has had a ripple effect on dozens of allied industries, including cement, steel, ceramics, electrical goods and construction materials.
He further observed that elevated interest rates have discouraged private-sector investment, forcing businesses to postpone expansion and modernisation plans. Lower investment, he said, ultimately translates into slower economic growth, weaker exports and reduced tax revenues.
Khurram Ijaz said Pakistan’s macroeconomic indicators have improved considerably over the past year, pointing to easing inflation, a relatively stable exchange rate and a stronger external sector.
He argued that these improvements provide the central bank with sufficient room to adopt a more growth-oriented monetary policy.
“A significant reduction in the policy rate will lower financing costs, stimulate investment, improve industrial productivity, boost exports and create much-needed employment opportunities. It will also strengthen investor confidence and support sustainable economic growth,” he said.
While acknowledging the SBP’s efforts to maintain macroeconomic stability, he stressed that monetary policy should strike an appropriate balance between controlling inflation and supporting economic expansion.
Khurram Ijaz urged the Monetary Policy Committee to announce a meaningful reduction in the benchmark policy rate at its meeting on July 27, saying such a move would provide timely relief to businesses, encourage private-sector investment and accelerate Pakistan’s economic recovery.
He expressed confidence that a lower policy rate would help revive industrial activity, improve export competitiveness, facilitate job creation and place the economy on a stronger and more sustainable growth trajectory.