Policy rate pause splits stakeholders

Pakistan's State Bank (SBP) has decided to hold its policy interest rate at 11.5%, a move that has divided stakeholders in the country's economy. While foreign investors see the decision as a balanced and prudent step, local business leaders are voicing strong criticism.

The Overseas Investors Chamber of Commerce and Industry (OICCI) Secretary General, M Abdul Aleem, described the SBP's pause as prudent. He noted it reflects an improvement in macroeconomic conditions, even as elevated inflation and external risks persist. Aleem believes the pause offers businesses much-needed breathing room, especially as private sector credit is increasing and economic activity showed recovery signs in June across sectors like automobiles, cement, and fertilizers.

However, local businessmen argue that this cautious approach will stifle economic activity and limit access to finance. Inflation remains above the target range at 11.1% for June. Risks from global commodity prices, Middle East tensions, food prices, and potential fiscal slippages necessitate caution, according to the SBP. Yet, local industry representatives fear that maintaining the current rate will impede growth and investment, despite the nascent signs of economic recovery.

“

SBP’s decision as prudent and balanced, reflecting improved macroeconomic conditions while acknowledging that inflation and external risks remain elevated.