As the State Bank of Pakistan (SBP) is expected to convene its last Monetary Policy Committee (MPC) meeting of the year on Monday, industrialists have called for an interest rate cut to “catalyse business activity”.
“With inflation under control, PKR holding steady, and reserves outperforming targets, it is imperative for SBP to pivot,” Musadaq Zulqarnain, CEO of Interloop Limited, one of Pakistan’s largest textile firms, said in a post on social media platform X, on Friday.
Musadaq said at least a 100bps policy rate cut “is now warranted”.
“Pakistan’s growth engine is stalled, and industry is under severe stress. A timely reduction in rates will catalyse business activity — and materially ease the government’s fiscal burden. The moment calls for decisive monetary support,” he said
Gohar Ejaz, another prominent industrialist and former caretaker Federal Minister for Commerce, echoed similar sentiments.
“Over the last 36 months, we have attempted to stabilise the economy but achieved less than 2% aggregate growth,” he wrote on X.
“During the same period, the exchange rate has deteriorated from Rs160 to Rs280 per US dollar, and exports have remained stuck at around $30 billion, which clearly shows that devaluation is not the solution to make exports competitive,” he noted.
Gohar highlighted that Pakistan’s interest rates are nearly twice as high as those in regional economies, including China and India.
“Pakistan’s Monetary Policy Committee has kept the policy rate at 11% since the beginning of the year—reducing it by only one percentage point in the last 12 months—resulting in average real interest rates above 6%.
“This is eroding industrial competitiveness, suppressing growth, and keeping the economy on a ventilator with no export expansion,” he said.
Gohar called for reducing interest rates to around 6%, and bringing real interest rates down to 1%, in line with regional benchmarks, over the next six months.
“This will also reduce government debt servicing by Rs3 trillion per year,” he said.
The SBP has held its policy rate at 11% since September, after cutting it by 1,100 basis points between June 2024 and May 2025 as inflation fell sharply from highs near 40% in 2023.
However, it has started to accelerate after months of decline, driven by food and transport costs and fading base effects. Headline inflation clocked in at 6.1% in November from 6.2% in October but remained above the SBP’s 5–7% target.
The IMF, in a second review released on Thursday, said monetary policy needs to remain “appropriately tight and data-dependent” to keep expectations anchored and noted that the SBP had maintained positive real interest rates on a forward-looking basis.
It said the tight stance had been pivotal in reducing inflation and should be maintained to ensure price stability and support the rebuilding of external buffers.
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