As the State Bank of Pakistan (SBP) prepares to hold its final Monetary Policy Committee (MPC) meeting of the year on Monday, industrialists are urging the central bank to slash interest rates to revive business activity.
Musadaq Zulqarnain, CEO of Interloop Limited, one of Pakistan’s largest textile firms, said a cut of at least 100 basis points is “now warranted” given stable inflation, a steady rupee, and stronger-than-expected reserves.
“Pakistan’s growth engine is stalled, and industry is under severe stress. A timely reduction in rates will catalyse business activity and materially ease the government’s fiscal burden. The moment calls for decisive monetary support,” Musadaq wrote on social media platform X on Friday.
Gohar Ejaz, former caretaker Federal Minister for Commerce, voiced similar concerns. He highlighted that over the past three years, Pakistan’s economy has struggled to grow, recording less than 2 percent aggregate growth.
“During this period, the exchange rate has jumped from Rs160 to Rs280 per US dollar, and exports have remained stuck at around $30 billion. Clearly, devaluation alone is not making exports competitive,” he said. Gohar added that Pakistan’s interest rates, nearly double those of regional economies like China and India, are stifling industrial competitiveness and holding back growth.
Policy rate at 11 percent since September
The SBP has kept its policy rate at 11 percent since September, following a 1,100 basis point cut between June 2024 and May 2025, as inflation eased from near 40 percent highs in 2023. Yet, inflation has begun to creep up again, driven by food and transport costs, with headline inflation at 6.1 percent in November, slightly above the SBP’s 5–7 percent target.
The IMF, in its latest review released Thursday, noted that monetary policy must remain “appropriately tight and data-dependent” to anchor expectations, praising the SBP’s positive real interest rates for supporting price stability and external buffers.
Despite this, industrialists argue the current rate is constraining growth. Gohar called for cutting interest rates to around 6 percent over the next six months, bringing real rates down to 1 percent, which could also save the government approximately Rs3 trillion annually in debt servicing.
With the MPC meeting imminent, the question remains whether the SBP will heed industrialists’ calls for monetary support or maintain its cautious stance to keep inflation in check.
