Karachi: The SITE Association of Industry (SAI) has strongly criticized the State Bank of Pakistan for raising the policy rate by 100 basis points to 11.5%, calling the move unexpected and harmful to economic recovery.
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SAI President Abdul Rehman Fudda said the business community had been expecting a shift toward single-digit interest rates to support growth, but the latest increase has instead added to financial pressures on industries.
“Industry is already grappling with high input costs, rising energy tariffs, weak export performance, and subdued domestic demand. Increasing borrowing costs at this stage will further discourage investment and strain working capital cycles,” he said.
Fudda noted that inflation in Pakistan is largely driven by supply-side constraints, exchange rate fluctuations, and administered price adjustments, rather than demand-side pressures. He warned that aggressive monetary tightening in such an environment could suppress economic activity without effectively controlling inflation.
The SAI chief also highlighted the severe impact on small and medium enterprises (SMEs), stating that higher interest rates would limit access to financing, delay Balancing, Modernization and Replacement (BMR) projects, and potentially lead to layoffs in industrial units.
He further cautioned that the decision sends a negative signal to investors, particularly at a time when expectations were aligned with monetary easing. “Policy consistency and predictability are essential for long-term investment planning. Sudden shifts undermine investor confidence,” he added.
Calling for urgent action, the association urged the central bank to review its monetary policy stance and engage with stakeholders to align decisions with the goal of sustainable economic growth.
