The Federation of Pakistan Chambers of Commerce and Industry has rejected the State Bank’s latest decision. Consequently, the business community rejects interest rate hike of 1 percent. FPCCI President Atif Ikram Sheikh called the move ill-timed and unfortunate. The economy was entering a recovery phase after stabilization. Therefore, continued monetary tightening makes little sense. Sheikh warned that higher rates could lead to industrial closures and economic stagnation. Pakistan no longer needs contractionary policies.

A high interest rate environment contradicts the government’s stated goals. These goals include economic revival, export growth, and job creation. Moreover, higher rates make Pakistani products less competitive regionally. The business community rejects interest rate hike because industries cannot survive under high borrowing costs. Regional economies offer much lower rates. For example, our competitors enjoy affordable financing while we struggle. Sheikh criticized the rate hike as a harsh setback for businesses.

Inflation in Pakistan is largely supply-driven. Energy costs and supply chain inefficiencies cause price spikes. Therefore, higher interest rates will not control inflation. Instead, they will increase the cost of doing business. This restricts private sector credit and accelerates de-industrialization. Senior Vice President Saquib Fayyaz Magoon said SMEs will suffer disproportionately. Rising energy tariffs and compliance costs combined with higher rates could push manufacturers toward defaults. Consequently, the business community rejects interest rate hike as a threat to jobs.

Factories are already operating below capacity in Sindh. Higher rates could lead to layoffs and stalled expansions. Cancelled orders may follow in coming months. FPCCI called on the Prime Minister and SBP Governor to reconsider. Meanwhile, the government should focus on reducing energy costs and expanding the tax base.