What happened

According to a report published by Dawn, the State Bank of Pakistan increased its benchmark policy rate by 50 basis points to 12 percent. The monetary policy decision has split opinion across the commercial sector. While foreign investors supported the rate increase as a necessary measure to control inflation, local business and trade associations voiced strong opposition, warning that higher borrowing costs will impede economic recovery, strain manufacturing, and harm export competitiveness.

Key facts

According to Dawn, key aspects of the decision and reaction include:

  • The State Bank of Pakistan raised the interest rate by 50 basis points to reach 12 percent.
  • M. Abdul Aleem of the Overseas Investors Chamber of Commerce and Industry welcomed the adjustment to manage inflation and energy price risks, noting that large-scale manufacturing growth reached 1.9 percent in July-August FY26 and private credit grew 14.1 percent year-on-year.
  • Leaders from major trade bodies—including the FPCCI, KCCI, SITE Association of Industry, Korangi Association of Trade & Industry, and the Pakistan Textile Exporters Association—opposed the move.
  • FPCCI President Atif Ikram Sheikh stated that inflation is driven by supply constraints, energy costs, and fiscal issues rather than excess demand, urging authorities to bring the policy rate down to single digits.
  • Business representatives stated that high interest rates will burden existing debt, discourage new private investment, and harm industrial capacity.
  • The exact vote breakdown of the State Bank board was not specified in the source; please check the official notice.

Why it matters

According to Dawn, domestic industrial representatives warn that elevated interest rates place an unmanageable debt-servicing load on both private sector borrowers and the government treasury. Business leaders caution that higher financing costs risk forcing formal enterprises to shrink or shut down entirely at a time when many factories are operating below capacity. While foreign investors view monetary tightening as vital for macroeconomic stability, local manufacturers contend that sustainable economic progress requires competitive energy prices, targeted supply-side reforms, and lower borrowing rates to support growth and job creation.

📰 Read the Original Report

Source: Dawn - Home · Published October 27, 2026 · Photo by Marian Florinel Condruz on Unsplash