Monetary Policy Sparks Criticism from Pakistan’s Trade and Industry Leaders

Karachi: The business, industry, and trade community in Pakistan have expressed dissatisfaction with the recent monetary policy decision by the State Bank of Pakistan (SBP), according to Mr. Atif Ikram Sheikh, President of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI). The SBP’s decision to reduce the policy rate by only 100 basis points (bps) instead of the 500 bps demanded by the industry has stirred disappointment.

Mr. Sheikh pointed out that the current Consumer Price Index (CPI) stands at 0.30 percent, yet the policy rate remains at 11.0 percent, indicating a significant premium of 1,070 bps over inflation. He argues that this discrepancy lacks economic justification.

During discussions within FPCCI’s platform, there was a consensus for a substantial rate cut to align with the government’s vision for economic growth. Mr. Sheikh emphasized the need for a 500 bps reduction to support the Special Investment Facilitation Council’s goals and the Prime Minister’s vision for industrial development, import substitution, and export growth.

The FPCCI President noted that the CPI is expected to stay between 0 to 3 percent in the coming months. He advocated for a policy rate reduction to 7 percent, aligning with these expectations.

Mr. Sheikh also highlighted the role of international oil prices, which are projected to remain stable or low, around $60 per barrel. This stability is crucial as oil prices significantly impact inflation in Pakistan.

Supporting this perspective, Mr. Saquib Fayyaz Magoon, Senior Vice President of FPCCI, mentioned that OPEC+ plans to increase oil output by 411,000 barrels per day in June 2025. Additionally, global oil prices have decreased by 3.9 percent, with Brent crude trading at $58.9 per barrel.

Mr. Magoon further argued that geopolitical tensions with India are unlikely to significantly influence international oil prices. He urged Pakistani authorities to reconsider their monetary policy stance and adopt measures that favor business and economic growth.