KARACHI: Despite mounting pressure from industry for immediate relief, a rate cut in the upcoming monetary policy appears unlikely, as the International Monetary Fund (IMF) has advised maintaining tight liquidity to curb expected inflation.
Industrial leaders have called for a reduction in interest rates to help them stay competitive globally, but the government appears satisfied with low economic growth, shrinking exports, rising imports and worsening poverty.
Several manufacturers have already begun shifting operations to Egypt, Mexico, Dubai and Vietnam. Some analysts say pressure is building for at least a 100 basis point cut when the policy is announced on Monday, though most believe the IMF’s stance will prevail.
The last reduction in the policy rate came in May. Since then, the benchmark rate has held at 11 per cent, even as headline inflation dipped to three per cent earlier this year. November inflation was recorded at 6.1pc, compared to 6.2pc in October.
The IMF, which released a $1.2 billion tranche on Thursday, praised the State Bank for maintaining positive real interest rates on a forward-looking basis and said the monetary stance must remain tight and data-driven.
Industrialists demand reduction to stay competitive globally
For the past three years, high interest rates have weighed on growth — first due to record 38pc inflation and now despite inflation falling sharply. Economic expansion has averaged below 2pc, while the central bank has remained focused on “sustainable growth”.
“With inflation under control, PKR holding steady, and reserves outperforming targets, it is imperative for SBP to pivot,” Interloop Limited CEO Musadaq Zulqarnain said in a post on X.
Interloop recently installed a textile unit in Egypt. He said Pakistan’s growth engine had stalled and the industry was under severe stress. “A timely reduction in rates will catalyse business activity — and materially ease the government’s fiscal burden. The moment calls for decisive monetary support,” he added.
However, senior banker Rashid M. Alam said inflation is unlikely to decline any further. If the monetary stance is guided strictly by inflation, then the State Bank should keep the rate as it is at 11pc, he said.
He added that the market remains uncertain, and any rate-cutting cycle amid high inflation, political uncertainty, border tensions, elevated petroleum prices and a widening current account deficit could trigger instability. Considering all these things, the case is to stay neutral, he said.
A former caretaker federal commerce minister, who is also an industrialist, posted on X that Pakistan’s interest rates are nearly twice those of regional economies, including China and India.
“Over the last 36 months, we have attempted to stabilise the economy but achieved less than 2 per cent aggregate growth,” he said, urging the government to reduce interest rates to around 6pc and bring real interest rates down to 1pc.
Published in Dawn, December 13th, 2025
