Interest Rate Decision by State Bank Draws Criticism from Karachi Business Leader

KARACHI: In a recent statement, Muhammad Jawed Bilwani, President of the Karachi Chamber of Commerce and Industry (KCCI), voiced strong criticism of the State Bank of Pakistan’s (SBP) decision to keep the policy interest rate at 11 percent, a level considered high by many economic analysts. This decision, which defied widespread expectations for a rate cut, has sparked concerns among business leaders about its potential impact on the economy.

Bilwani argued that with core inflation having significantly decreased, there is no substantial economic justification for maintaining such elevated borrowing costs. The State Bank, however, cited recent inflation upticks and anticipated energy price pressures as reasons for holding the rate steady. Bilwani dismissed these reasons as unconvincing and economically unsound.

He emphasized that even in economies with similar inflation levels, interest rates have been reduced to support economic growth. By not seizing the opportunity to lower rates, Bilwani believes the State Bank has hindered economic recovery and placed an unnecessary burden on Pakistan’s private sector, particularly small and medium enterprises and manufacturers.

Bilwani highlighted that other regional economies have adopted monetary easing to stimulate growth. He pointed out that countries like India, Bangladesh, Indonesia, and Vietnam have set their policy rates significantly lower than Pakistan’s, which has strained the competitiveness of Pakistani exports.

The KCCI President warned that high interest rates have limited working capital availability, increased default risks, and raised the cost of doing business. He expressed disappointment that the SBP did not pursue a more proactive monetary policy to support fiscal consolidation efforts and re-energize economic activity.

Bilwani concluded by cautioning that the decision could prolong economic stagnation, hinder job creation, and force more businesses to shut down, posing a severe challenge to economic recovery in Pakistan.