Rate hike divides business community

Dawn · 27/10/2026، 2:42:24 AM

KARACHI: Foreign investors welcomed the State Bank of Pakistan’s (SBP) 50bps rate hike to 12 per cent on Monday, but the business community called it counterproductive for stabilisation, industrial growth and export competitiveness. M. Abdul Aleem, Secretary General of the Overseas Investors Chamber of Commerce and Industry, acknowledged the SBP’s move, saying it was needed to contain inflationary pressure and safeguard macroeconomic stability amid global energy price risks. However, with large-scale manufacturing growth recovering to 1.9pc in July-August FY26 and private-sector credit expanding 14.1pc year-on-year, it is equally important to sustain the emerging momentum in investment and economic activity, he said. As inflationary pressures are significantly influenced by external energy prices and domestic supply constraints, he emphasised that monetary tightening must be complemented by targeted supply-side reforms, fiscal discipline, competitive energy tariffs, broader tax-base coverage and predictable taxation and regulatory policies. Foreign investors back SBP’s move to curb inflation, while industry says it will hurt exports and growth In contrast, FPCCI President Atif Ikram Sheikh said raising the policy rate to an uncompetitive 12pc would further inflate borrowing costs for manufacturers already grappling with unprecedented high overheads, soaring utility tariffs and liquidity constraints. Instead of curbing inflation — driven largely by supply-side bottlenecks, energy costs and fiscal anomalies rather than excess demand — tight monetary policy has crippled domestic manufacturing, he said, urging the government and the State Bank to recalibrate the framework and bring the policy rate to single digits to make credit affordable for trade, SMEs and large-scale manufacturing. High interest rates also place an unmanageable debt-servicing burden on the exchequer and private borrowers, creating a cycle of fiscal distress and stagnant output, he said, asking the S