Business leaders on Monday criticised the State Bank of Pakistan’s (SBP) decision to keep the policy rate unchanged at 11.5%, arguing that expensive financing was continuing to constrain industrial activity, investment and exports amid a challenging economic environment.

Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Atif Ikram Sheikh described the decision as contractionary and counterproductive, saying trade and industry urgently needed some breathing space to revive economic activity. He said monetary policy was one of the few effective tools currently available to authorities to provide relief to businesses, but the opportunity had not been utilised.

The FPCCI president said the business community had called for a reduction in the policy rate to single digits to lower the cost of doing business and support industrial activity.

He argued that the central bank’s cautious approach did not adequately reflect the challenges facing businesses, particularly as the trade deficit increased 18.1% year-on-year during July-August 2026.

According to Sheikh, industries were facing an existential challenge due to high energy tariffs, rising petroleum prices, geoeconomic uncertainty and elevated financing costs.

He said manufacturing sectors were struggling to expand as businesses faced severe difficulties in securing the capital required for operations and investment.

The FPCCI chief warned that continued high borrowing costs would further weaken private-sector credit uptake, affecting both small and medium enterprises (SMEs) and large-scale manufacturers.

He said the high cost of capital was also hurting Pakistan’s export competitiveness, as manufacturers were unable to keep production costs competitive in international markets.

Exporters, he added, were losing market share to regional competitors that benefited from relatively accessible financing at single-digit interest rates. Sheikh said the high cost of export refinancing in Pakistan was making local products less competitive, resulting in the loss of export orders and weakening foreign exchange earnings.

Separately, Korangi Association of Trade and Industry (KATI) President Muhammad Ikram Rajput also expressed concern over the policy rate decision, saying high interest rates were slowing industrial recovery, new investment and export growth.

The KATI president acknowledged that geopolitical tensions in the Middle East, possible increases in global crude oil prices and external economic uncertainty remained significant risks. However, he said domestic industries were simultaneously struggling with higher production costs, electricity and gas tariffs, and fluctuations in petroleum prices. He called for further monetary easing and urged the SBP to provide a clear roadmap for gradually bringing the policy rate into single digits as global conditions improve.

Rajput said expensive financing was discouraging new industrial projects, capacity expansion, technological investment and production growth while increasing the cost of Pakistani goods in international markets. He particularly highlighted the difficulties faced by SMEs, saying limited access to affordable financing was hurting their expansion, employment generation and production capacity.