Businesses Divided Over State Bank’s Rate Rise to 12%

Business groups in Pakistan have given a mixed response to the State Bank of Pakistan’s decision to raise its key policy rate by 50 basis points to 12 per cent, with local chambers warning about higher borrowing costs while the overseas investors’ chamber backed the move as cautious.

What happened?

The State Bank raised the policy rate from 11.5 per cent to 12 per cent on 26 October 2026. Reporting on 27 October showed local business bodies criticising the increase, while the Overseas Investors Chamber of Commerce and Industry (OICCI) described it as a right step given elevated energy prices amid geopolitical tensions.

Key details:

• The policy rate rose by 50 basis points, from 11.5 per cent to 12 per cent.
• OICCI secretary general Abdul Aleem Khan called the increase a cautious approach, saying the central bank could have raised the rate by more but chose a smaller step amid the risk of rising inflation as geopolitical tensions push up energy prices.
• Federation of Pakistan Chambers of Commerce and Industry (FPCCI) president Atif Ikram Sheikh expressed concern and disappointment, describing 12 per cent as uncompetitive compared with regional economies and warning that tighter policy could dampen industrial expansion and erode export competitiveness.
• Karachi Chamber of Commerce and Industry (KCCI) president Talat Mahmood warned the move will increase the cost of doing business, discourage private-sector investment and slow economic growth.
• Federal B Area Association of Trade and Industry president Syed Raza Hussain, SITE Association of Industry president Abdul Hadi and Korangi Association of Trade and Industry president Sheikh Umer Rehan also criticised or expressed disappointment over the decision.
• Business leaders opposing the rise argued that inflationary pressure comes mainly from energy and fuel prices, geopolitical uncertainty, supply-chain disruption and higher essential commodity prices rather than excess domestic demand.

What it means for people in Pakistan:

The policy rate shapes what banks charge for loans, so a higher rate can mean costlier borrowing for businesses and households alike. Supporters of the move say it guards against inflation expectations becoming entrenched, while critics argue it raises costs for factories and traders already squeezed by energy prices — a tension that will show up in investment, hiring and prices in the months ahead.

Source: https://www.thenews.pk/print/1445230-businesses-divided-over-sbp-s-50bps-rate-hike