What happened
Pakistani industry leaders warned on 30 May 2026 that further tightening of monetary policy could significantly reduce private-sector participation in the economy, saying high borrowing costs had already restricted access to credit.
At its monetary policy review on 27 April 2026, the State Bank of Pakistan (SBP) raised its policy rate by 100 basis points to 11.5 per cent after holding it steady for almost two years, citing an upsurge in inflationary pressure driven by the war in the Middle East. The move was widely criticised by trade and industry groups.
Dawn reported that the SBP had assured the visiting International Monetary Fund (IMF) mission, which concluded discussions on the upcoming budget on Thursday, that it would maintain a tight monetary policy to contain inflation, but that the effect on economic growth was not considered.
In its half-yearly report on the State of the Economy for FY26, the central bank expressed deep concern over weak growth in private-sector credit, which it said grew by 0.9 per cent year on year at the end of December 2025, compared with a 22.8 per cent increase in the same period a year earlier.
Why it matters
Saqib Fayaz Magoon, senior vice president of the Federation of Pakistan Chambers of Commerce and Industry, told Dawn that any further increase in the interest rate would be “devastating” for an industry already struggling, and said Pakistan’s rate was the highest in the region. He said firms were facing a very tough situation because of the high cost of production caused by expensive money and unprecedented energy prices, which he said had made them uncompetitive in international markets.
Textile exporter Amir Aziz told the newspaper his company was unable to bear the cost of production and risked losing the European market to cheaper Chinese, Indian and Bangladeshi products. Money market expert S.S. Iqbal said consumption was being sustained by about $40 billion in remittances, equivalent to more than Rs11 trillion a year, in an economy where 100 million people live below the poverty line.
Dawn noted that the government has kept petroleum and LNG prices at the highest levels compared with regional prices, while international energy prices fluctuate and the situation in the Gulf remains unclear.
Sources & reporting notes
This is a summary of published reporting, not independent reporting. Figures and quotations are as carried by the cited outlet. Sources reviewed on 2026-05-30.
- Dawn — "High interest rates stifling growth, warn industry leaders"30 May 2026 · Reports the SBP's assurance to the IMF mission, the weak private-sector credit data and the industry warnings.
