The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has urged the State Bank of Pakistan (SBP) to cut interest rates to single digits after the central bank raised its policy rate by 0.5 percentage points to 12%.

FPCCI President Atif Ikram Sheikh said the rate hike would increase borrowing costs for businesses already struggling with high operating expenses, expensive utilities, and cash flow problems.

He warned that higher interest rates could slow industrial growth, discourage investment, and make Pakistani exports less competitive in international markets.

Sheikh said expensive credit was making it harder for manufacturers and businesses to finance production, maintain operations, and create jobs. He argued that businesses needed affordable financing to expand and invest in new technology.

The FPCCI president also questioned the effectiveness of higher interest rates in controlling inflation, arguing that price increases were largely driven by supply constraints, rising energy costs, and fiscal problems rather than excessive consumer demand.

He said tighter monetary policy could put further pressure on productive industries without addressing the underlying causes of inflation.

Sheikh called on the government and the central bank to bring the policy rate down to single digits, saying lower borrowing costs would help small and medium-sized enterprises, traders, and large manufacturers invest, expand production, and compete with regional businesses.

He also warned that high interest rates increase debt-servicing costs for the government and private borrowers, adding to financial pressure and potentially limiting economic growth.

The FPCCI urged the central bank and government to adopt a more growth-oriented monetary policy, bring interest rates closer to regional levels, and consult business representatives before making decisions that affect economic activity.