Karachi, March 10, 2026 – The Institute of Cost and Management Accountants of Pakistan has released its latest ICMA MPS review by its Research Department on the SBP’s Monetary Policy Statement announced yesterday [March 9, 2026] identifying a strategic opportunity to strengthen manufacturing growth through targeted credit interventions while maintaining the current policy rate at 10.5 percent.
The SBP’s Monetary Policy Committee decided to maintain the policy rate at 10.5 percent, citing heightened uncertainty following the outbreak of conflict in the Middle East. The war has pushed up global fuel prices, freight, and insurance costs, posing risks to trade and supply chains. On the domestic front, headline inflation rose to 7.0 percent in February, while large-scale manufacturing recorded cumulative growth of 4.8 percent during July–December FY26. The current account posted a surplus of $121 million in January 2026, allowing SBP to raise foreign exchange reserves to $16.3 billion, while consumer confidence improved and business sentiment remained stable. Despite these positive signals, FBR tax collection remained below target, widening the fiscal gap.
Amidst this mixed economic picture, ICMA’s analysis brings into focus a persistent challenge that has long constrained Pakistan’s industrial potential: credit accessibility for the manufacturing sector. Using the Manufacturing Credit Transmission Gap (MCTG) model, ICMA evaluates whether banking sector lending is keeping pace with manufacturing output. The MCTG compares the growth of credit extended to manufacturing with the growth of manufacturing output itself. When the MCTG hovers near zero, it signals a balanced scenario where credit growth matches output growth—the ideal condition for efficient industrial expansion. In the second quarter of FY 2026, that is precisely what happened. The MCTG narrowed to -0.31 percent, bringing credit growth nearly in line with the manufacturing output. ICMA describes this as a rare opportunity to strengthen industrial credit at a moment when the economy can absorb it most effectively.
Rather than calling for a broad reduction in the policy rate, ICMA recommends that SBP may seize this opportunity by providing targeted, low-interest credit specifically directed at the manufacturing sector while maintaining the general policy rate at 10.5 percent. This approach, modeled on global examples such as the European Central Bank’s TLTROs and the People’s Bank of China’s sector-specific refinancing, can support industrial growth, strengthen monetary transmission, and avoid over-leverage or broader inflationary pressures.
Targeted credit, however, is only one piece of a larger puzzle. In addition to targeted credit support, ICMA recommends maintaining vigilance over inflation using flexible macro-prudential tools, such as sectoral credit caps or liquidity windows, instead of broad policy rate cuts. Support for exports and remittances through credit guarantees, reduced financing costs, and improved trade logistics can reduce external vulnerabilities. Fiscal revenue mobilization should be strengthened through base-broadening measures, improved compliance, and reduced dependency on bank borrowing to free credit for private investment.
ICMA observes that targeted financing for strategic manufacturing sectors, including textiles, chemicals, machinery, and agriculture, can generate positive spillovers for services and trade, while diversifying import sources and building foreign exchange buffers will help mitigate geopolitical and supply chain risks.
As part of its comprehensive MPS review process, the ICMA Research department also reaches out to experts and businessmen to incorporate their perspectives into its analysis. Their views reflect broad support for the SBP’s decision to hold the policy rate steady.
Dr. Manzoor Ahmad, member of the Prime Minister’s Committee on Tariff, emphasized the importance of vigilance against inflation and fully supports the central bank’s “wait and see” approach. Dr. Ikram ul Haq pointed to global oil supply disruptions and called the rate decision prudent. Mr. Muhammad Sabir of SPDC and Mr. Aadil Nakhoda of IBA Karachi agreed that maintaining a positive real interest rate anchors inflation expectations and supports fiscal stability. Industry representatives, including Mr. Miftah Ismail, Mr. Asif Inam of FPCCI, and Mr. Usman Shaukat of RCCI, noted that holding the policy rate protects business confidence amid geopolitical uncertainty while allowing room for cautious economic growth.
ICMA emphasizes that the current MCTG window represents more than just a statistical observation—it is a strategic opportunity for targeted interventions in manufacturing. By acting now, the SBP can strengthen industrial growth and improve monetary transmission without compromising overall macroeconomic stability. The Institute calls for continued monitoring of inflation, sustained fiscal consolidation, ongoing sectoral support, and enhanced trade facilitation to maintain Pakistan’s economic momentum amid both external and domestic risks.
