Calls for Single-Digit Policy Rate to Revive Manufacturing, Exports and Business Confidence
Rawalpindi: Usman Shaukat, Vice Chairman of the Pakistan Pharmaceutical Manufacturers Association (PPMA) and former President of the Rawalpindi Chamber of Commerce & Industry (RCCI), has strongly criticised the State Bank of Pakistan’s decision to raise the policy rate by 50 basis points to 12%, warning that the move could undermine investor confidence and slow economic recovery.He said the decision was inconsistent with the recent easing in inflationary pressures, as headline inflation declined from 11.15% in August to 10.26% in September, while core inflation also showed signs of moderation.
He stressed that the prevailing economic situation called for monetary relief to support business activity rather than further tightening.“Pakistan’s inflationary pressures are largely driven by supply-side factors, including international oil prices and domestic wheat prices. Increasing interest rates cannot bring down the cost of imported fuel or wheat; instead, it raises borrowing costs for businesses that generate employment, support industrial production and earn foreign exchange,” he said.Usman Shaukat highlighted that higher interest rates increase working capital requirements, delay investment and expansion plans, and weaken the competitiveness of exporters facing challenging global market conditions. He particularly emphasised the difficulties faced by the pharmaceutical industry, which relies heavily on imported raw materials and operates under regulated pricing mechanisms, limiting its ability to pass on rising financing costs.He further observed that higher policy rates increase the government’s debt-servicing burden, potentially reducing fiscal space for development and productive investment.“Pakistan cannot achieve sustainable industrial growth with double-digit interest rates. A clear and credible roadmap towards a single-digit policy rate is essential to revive investment, expand manufacturing, strengthen exports and create employment,” he stated.
Usman Shaukat urged the State Bank of Pakistan and the federal government to reconsider the current monetary policy stance at the next Monetary Policy Committee meeting scheduled for December 14. He also called for meaningful consultation with the business community to ensure that monetary policy decisions facilitate industrial expansion, economic stability and sustainable growth rather than constrain productive economic activity.
