KATI Labels Interest Rate Hold as Short-Term Measure Amid Global Tensions

KARACHI: The Korangi Association of Trade and Industry (KATI) has labeled the State Bank of Pakistan’s decision to maintain its policy rate at 11% as a temporary measure in response to current global and regional challenges. Junaid Naqi, the KATI President, highlighted that geopolitical tensions, including the Iran-Israel conflict, have caused a spike in global oil prices, affecting international trade and supply chains.

Naqi pointed out that domestic economic indicators, such as a drop in inflation to 3.5% in May, suggest Pakistan is ready for a reduction in interest rates. He explained that globally, lower inflation usually leads to reduced interest rates to promote investment, a trend not yet seen in Pakistan.

The business community has consistently called for single-digit policy rates to lower production costs and enhance export competitiveness. Naqi expressed support for the current decision but urged for industry-friendly reforms once the global situation stabilizes.

Recent increases in petroleum prices are expected to further burden the industrial sector, raising production costs. Naqi warned that achieving the government’s GDP growth target of 4.2% for FY26 hinges on creating a supportive financial environment.

As conditions improve, Naqi urged the State Bank to cut the policy rate by 2 to 3 percentage points to encourage industrial growth. He expressed optimism that the government will soon adopt pro-industry policies to bolster sustainable growth in Pakistan’s economy.