Rate Hike Sparks Division Among Business Leaders in Pakistan

KARACHI: The State Bank of Pakistan (SBP) announced a 50 basis points increase in its policy rate to 12 percent on Monday, a move that has drawn mixed reactions from the business community. While foreign investors have welcomed the decision as a necessary step to combat inflation, local business leaders argue it could hinder industrial growth and export competitiveness.

M. Abdul Aleem, Secretary General of the Overseas Investors Chamber of Commerce and Industry, acknowledged the SBP’s action as essential for maintaining macroeconomic stability amid rising global energy prices. He emphasized the importance of addressing inflationary pressures, which are significantly influenced by external factors and domestic supply constraints.

Despite the rate hike, Aleem pointed out that large-scale manufacturing has shown signs of recovery, with growth reaching 1.9 percent in July-August FY26 and private-sector credit expanding by 14.1 percent year-on-year. He stressed that sustaining this momentum requires not only monetary tightening but also targeted supply-side reforms, fiscal discipline, and competitive energy tariffs.

Looking ahead, stakeholders are calling for a comprehensive approach that includes broader tax-base coverage and predictable taxation policies to support economic activity. The SBP’s next monetary policy meeting will be closely watched for further developments in this ongoing debate.