FPCCI Criticizes SBP for Maintaining High Policy Rate Despite Falling Inflation

• Business community urges interest rate cut to support growth, exports, and investment

KARACHI: The Federation of Pakistan Chambers of Commerce & Industry (FPCCI) has expressed strong disappointment over the State Bank of Pakistan’s (SBP) decision to keep the policy rate unchanged at 11%, despite a significant drop in inflation.

FPCCI President, Atif Ikram Sheikh, criticized the status quo in the monetary policy, calling it misaligned with current economic indicators. According to government data, the Consumer Price Index (CPI) fell to 3.5% in May 2025, yet the SBP has continued with a high interest rate that imposes a 750 basis point (bps) premium over inflation.

“This premium makes no economic sense,” stated Sheikh. “We had urged the central bank to implement a one-time rate cut of 400 bps to bring the policy rate down to 7%.”

Sheikh emphasized that such a reduction would support the government’s broader economic vision led by the Special Investment Facilitation Council (SIFC) and the Prime Minister’s roadmap for industrial development, import substitution, and export growth.

Business Community Concerns Over High Cost of Doing Business

The FPCCI highlighted that Pakistan’s cost of doing business, ease of access to finance, and export competitiveness continue to lag behind other regional players, primarily due to the elevated interest rates.

“We are already seeing a downward trend in inflation, expected to remain between 2% to 4% during June and July 2025,” added Sheikh. “Now is the right time to reduce interest rates and shift focus towards economic growth.”

Call for Immediate Action to Boost Exports

Supporting the president’s stance, Saquib Fayyaz Magoon, Senior Vice President of FPCCI, echoed the call for a substantial rate cut. He stressed the need for single-digit interest rates to reduce the cost of capital for businesses, enabling Pakistani exporters to compete more effectively in regional and global markets.

“High policy rates are choking investment and innovation,” said Magoon. “Exporters can’t survive in today’s global economy with such high financial costs.”