Korangi Association of Trade and Industry (KATI) President Muhammad Ikram Rajput has expressed strong reservations over the State Bank of Pakistan’s Monetary Policy Committee decision to reduce the policy rate by only 0.5 percentage points to 10.5 percent, calling it contrary to the demands of the business community. He stated that the cut is far below the required level and that sustainable economic growth is only possible if the policy rate is brought down to single digits.
He noted that the SBP had previously kept the policy rate unchanged at 11 percent for seven months since May 2025. According to Ikram Rajput, the modest 0.5 percent reduction falls well short of industry expectations and offers no meaningful relief to industries already burdened by high production costs. Given the significant decline in inflation, he said a reduction of at least 200 to 300 basis points was needed.
The KATI president emphasized that industrialists have consistently demanded an immediate reduction of the policy rate to single digits to put the economy back on a growth trajectory. He added that even at 10.5 percent, Pakistan’s interest rate remains far higher than those of regional competitors, severely undermining export competitiveness.
He further stated that high interest rates have made bank borrowing extremely expensive, discouraging investment in new industrial units and expansion of existing ones. Costly financing directly increases production costs, making Pakistani products more expensive and less competitive in both domestic and international markets.
According to Ikram Rajput, elevated interest rates have also made access to finance nearly impossible for small and medium-sized enterprises, which form the backbone of the economy and employment generation. He warned that continued pressure on investment and rising production costs are putting the export sector under severe strain, negatively impacting foreign exchange reserves.
He concluded that insufficient reduction in the policy rate will keep business activity sluggish and hinder the achievement of economic growth targets. The KATI president urged the government and the State Bank to acknowledge ground realities and take bold, decisive steps by further cutting interest rates to pull the economy out of crisis, boost industrial growth, and create employment opportunities.
