Calls on SBP to carefully assess inflationary pressures ahead of October 26 monetary policy announcement
KARACHI: Khurram Ijaz, General Secretary of the Businessmen Panel Progressive (BMPP) and former president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has warned that any increase in the policy rate by the State Bank of Pakistan (SBP) would further raise the cost of production, fuel inflation and put additional pressure on businesses and consumers.
With the central bank scheduled to announce its monetary policy on October 26, 2026, market expectations of a possible interest rate hike have increased amid a recent surge in inflation. However, Ijaz urged the SBP to carefully analyse the nature and underlying causes of inflation before making any decision, particularly in view of rising global energy prices resulting from the ongoing conflict in the Middle East.
He said the central bank should distinguish between demand-pull inflation, which can be addressed through tighter monetary policy, and cost-push inflation driven by higher input costs. According to him, the current inflationary pressure is largely cost-push in nature and is linked to rising energy prices and disruptions in international fuel supplies and shipping routes.
Ijaz noted that the SBP had previously reduced the policy rate from its peak of 22 percent to 10.50 percent before increasing it to the current level of 11.50 percent. He cautioned that further monetary tightening could undermine business confidence and increase borrowing costs at a time when the private sector was already struggling with escalating operational expenses.
Referring to the latest inflation figures released by the Pakistan Bureau of Statistics (PBS), Ijaz highlighted substantial year-on-year increases in domestic energy prices amid the Middle East crisis. Liquefied petroleum gas (LPG) prices surged by 107 percent, electricity tariffs increased by 59 percent, petrol prices rose by 44 percent and diesel prices went up by 41.56 percent.
He said these sharp increases had raised transportation, manufacturing and other operating costs, subsequently pushing up the prices of essential commodities and contributing to inflation approaching 12 percent.
“The private sector is already facing immense pressure due to the rising cost of doing business. An increase in the policy rate at this stage would make commercial borrowing more expensive, discourage investment and place an additional burden on industries already operating under difficult conditions,” Ijaz said.
He added that businesses would ultimately have little choice but to pass on higher financing and production costs to consumers, further eroding purchasing power and worsening inflationary pressures.
Ijaz emphasised that the current energy-driven inflation could ease if tensions in the Middle East de-escalated and fuel supplies through the Strait of Hormuz and other international shipping routes returned to normal.
He urged the SBP to adopt a cautious, evidence-based approach and avoid premature monetary tightening that could hurt industrial activity, investment and economic growth. Maintaining a stable and predictable interest rate environment, he said, was essential to supporting businesses, protecting employment and improving the country’s economic outlook.