KATI Terms Interest Rate Decision Temporarily Acceptable Amid Global Uncertainty

KARACHI: The Korangi Association of Trade and Industry (KATI) has termed the State Bank of Pakistan’s
decision to maintain the policy rate at 11% as temporarily acceptable given the prevailing global and
regional challenges. KATI President Junaid Naqi said that ongoing geopolitical tensions in the region,
including the Iran-Israel conflict in the Middle East, have triggered a sudden spike in global oil prices.
Additionally, the closure of airspace by several countries has disrupted international trade and supply
chains, creating an environment of uncertainty that calls for cautious economic measures.
However, Naqi emphasized that domestic economic indicators suggest Pakistan’s economy is now ready
for a reduction in interest rates. “Inflation fell to just 3.5% in May—the lowest level in years. Globally,
when inflation decreases, interest rates are reduced to encourage investment and industrial activity, yet
Pakistan has yet to reflect this trend,” he said.
Naqi highlighted that the business community has consistently demanded that the policy rate be
brought into single digits to reduce production costs and make Pakistani exports more competitive in
international markets. “Given the current global and national challenges, the business community
stands firmly with the government and supports measures taken in the national interest,” he added.
“We accept the central bank’s decision in light of these extraordinary circumstances but expect industry-
friendly reforms once the situation stabilizes.”
The KATI president also pointed to the recent increase in petroleum product prices, warning that this
will further burden the industrial sector and escalate production costs.
He noted that the government has set a GDP growth target of 4.2% for FY26, but achieving this goal is
contingent on providing a conducive financial environment for industry, the backbone of the economy.
“As soon as global and regional conditions improve, we urge the State Bank to reduce the policy rate by
at least 2 to 3 percentage points in the next monetary policy to foster industrial growth and stabilize the
national economy.”
“We recognize that the current decision is shaped by global challenges,” Naqi concluded, “but we
remain optimistic that the government will soon implement pro-industry policies to ensure Pakistan’s
industry and economy move steadily toward sustainable growth.”