Ateeq Ur Rehman Urges SBP to Cut Policy Rate, Warns of Rising Business Costs

Economic and financial analyst Ateeq Ur Rehman has urged the State Bank of Pakistan (SBP) to reduce the policy rate in its upcoming monetary policy decision. He warned that higher borrowing costs could put further pressure on businesses, industries, exporters, farmers and ordinary consumers.

Rehman said the current policy rate of 11.50% already places a heavy burden on business, industrial and agricultural activities. Any further increase, he added, would raise production costs and make goods more expensive for consumers.

He also cautioned that higher interest rates could weaken demand for financing. Businesses and individuals may hesitate to borrow if banks increase lending rates.

Higher Rates Could Slow Business Activity

Rehman said banks and financial institutions need to expand lending to businesses, farmers, homebuyers and underserved communities. However, higher borrowing costs could discourage these groups from seeking credit.

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He highlighted mortgage financing as an important tool for financial inclusion. According to Rehman, affordable housing could become harder to achieve for low- and middle-income households if financing costs rise.

Moreover, expensive credit could force businesses and industries to scale back their operations. This would put additional pressure on economic activity and employment.

Exporters Face Rising Financing Costs

Rehman also expressed concern about Pakistan’s external trade position. He warned that higher policy rates could increase financing costs and place further pressure on the country’s trade balance.

Exporters already face challenges in financing working capital, purchasing raw materials and covering operational expenses. Consequently, higher borrowing costs could disrupt production and weaken their international competitiveness.

He further claimed that shipping costs have increased by almost 200%. Exporters are absorbing a substantial share of these additional expenses, he said.

According to Rehman, any increase in interest rates could add to their financial burden. Exporters often pay shipping charges in local currency after arranging financing, which can increase their overall costs.

SMEs and Farmers Need Affordable Credit

Rehman stressed the importance of small and medium-sized enterprises (SMEs) to Pakistan’s economy. He cited estimates that SMEs account for 82% of the economy’s business base and contribute 45% of gross domestic product (GDP).

These enterprises include vendors, shopkeepers, traders, importers and exporters. Many rely on affordable credit to manage daily operations and maintain business activity.

Therefore, higher borrowing costs could affect their access to finance and limit their ability to grow. Rehman called for easier access to credit and more affordable financing options.

He also described agriculture as a key pillar of Pakistan’s economy. Farmers need reliable financing on affordable terms to support agricultural production. Higher interest rates, he warned, could discourage borrowing and put pressure on farming activity.

Call for a Policy Rate Cut

Rehman urged the SBP’s Monetary Policy Committee to reduce the policy rate at its next meeting. He said lower borrowing costs could help businesses, exporters, SMEs and farmers manage expenses and sustain production.

He also warned that rising financing costs could eventually affect consumers through higher prices. In his view, affordable credit remains essential to supporting economic activity, financial inclusion and access to housing.

The concerns and economic estimates in this report reflect statements attributed to Ateeq Ur Rehman. The policy rate, shipping-cost increase and SME figures should be independently verified before publication.