As the Monetary Policy Committee of the State Bank of Pakistan prepares to announce its decision on September 15, 2025, the Federation of Pakistan Chambers of Commerce and Industry’s Businessmen Panel (BMP) has called on the central bank to bring down the key policy rate into single digits to revive the economy.
Former FPCCI president and BMP chairman Mian Anjum Nisar said that already inflation and an excessively high mark-up rate have drastically reduced private sector borrowings during the first quarter of the current fiscal year and warned that maintaining the current rate would deepen the slowdown rather than contain inflation, which is largely being driven by supply-side disruptions from recent floods.
He said that an accommodative monetary stance was urgently needed to counter the impact of devastating rains and floods that have damaged crops, destroyed infrastructure and disrupted supply chains, and that lowering the cost of borrowing would be the only way to help farmers, traders and manufacturers rebuild their operations.
He said the government has projected economic growth of around 3 to 3.5 percent while some international agencies see it as low as 2.3 percent for the ongoing financial year amid the highest real interest rate environment in the region. He noted that Pakistan’s current policy rate stands at 11 percent, far above the mark-up rates of China, India and Bangladesh, which makes Pakistani exports and domestic industry uncompetitive at a time when production costs are already elevated due to expensive energy and imported inputs. The BMP chairman pointed out that during the catastrophic 2010-11 floods the cultivated area for major crops declined sharply and rice production fell by nearly 30 percent, underscoring the scale of risks now facing the economy as this year’s floods threaten food supplies and push up prices. He said that while headline inflation is high, much of it is due to supply bottlenecks, not excessive demand, and therefore can be better addressed by lowering financing costs so businesses can invest in logistics, storage and processing to reduce shortages.
Mian Anjum Nisar said that the expectation of further monetary tightening and the fear of another discount rate hike have already sparked panic among investors and led to a crisis-like situation in the economy. He said that with interest rates at 11 percent and bank spreads still wide, small and medium enterprises are being choked off from credit at precisely the time they need it most. He urged the new finance minister to fulfil his commitment to maintain an accommodative monetary stance in the near and long term to support a rare recovery amid unprecedented flood worries and other challenges facing the country. He stressed that a low key policy rate is essential to make the export sector as well as the local industry competitive and that only a friendly monetary policy will allow the business community to absorb their rising debt liability through lower mark-up rates. He said that most economic activity data and indicators of consumer and business sentiment remain unsatisfactory and therefore trade and industry need continued support from the government in the form of lower interest rates in the face of such external shocks. He warned that without a clear signal from the SBP that it stands with the productive sectors, there is a risk of further layoffs, factory closures and contraction in exports.
He appreciated the government’s energy tariff relief for the export sector and demanded the same relaxation especially for the small and medium enterprises as a first step towards cutting production costs, saying the second and vital step towards this direction would be bringing the discount rate to the regional level to provide a level-playing field to the industry. The decision would be equally important for domestic producers who are facing stiff competition from cheaper imported merchandise following free trade agreements with several countries. He said that lower interest rates would allow industries to finance technology upgrades, improve productivity and comply with environmental standards demanded by international buyers, all of which would enhance Pakistan’s export profile. He also urged the central bank to announce a special initiative related to loans for small and medium enterprises particularly in flood-hit areas where banks are always reluctant to offer concessional credit without collateral, saying that concessional financing could be tied to job creation, export performance and rehabilitation of local supply chains.
The BMP warned that the trade deficit and any further increase in the interest rate would kill the economy and said this was the direct result of excessive foreign borrowing and continuous rupee depreciation. It called for an end to this destruction by enhancing exports and bridging the trade gap, which alone has the potential to help stabilise the economy, halt rupee depreciation, create millions of jobs and generate hundreds of billions in taxes.
Mian Anjum Nisar said that bringing the policy rate down into single digits would also strengthen the rupee by reviving investor confidence and signalling a shift from a purely contractionary approach to one that recognises the importance of growth. He said that cheaper credit would help businesses rebuild inventories, pay suppliers and expand production, all of which would ease pressure on prices over time rather than exacerbate it. He added that with better access to finance, businesses could invest in storage and cold-chain facilities to prevent post-harvest losses, a key factor in volatile food prices after floods.