RECORDER REPORT
ISLAMABAD: The All Pakistan Textile Mills Association (APTMA) has called on the State Bank of Monetary Policy Committee (MPC) to reduce the policy rate by 200 basis points from the current 11% to 9%.
SBP’s MPC is scheduled to hold a meeting on July 30, 2025 to review policy rates and there is speculation that a rate reduction will be in the range of 50-100 basis points.
In a statement issued Monday, APTMA said, “Maintaining the policy rate at 11% in the current economic environment results in a punitive real interest rate of 6%, one of the highest in the region. With inflation hovering around 5%, we urge the MPC to align the policy rate accordingly.”
The Association pointed out that Pakistan’s real interest rate significantly exceeds that of regional competitors, with India at 3.4% and China at 1.4%. APTMA warned that excessive monetary tightening is eroding the country’s regional and global competitiveness, while also suppressing domestic industrial activity.
“Pakistani industries are already burdened with electricity tariffs of 12–14 cents per kWh substantially higher than the regional average of 5–9 cents and must also contend with financing costs that are nearly double those faced by regional competitors,” the statement noted. “This, coupled with an alarming unemployment rate of 22% far higher than India’s 4.2% and China’s 4.6% renders the current monetary policy framework economically untenable.”
APTMA further emphasized that the Federal Board of Revenue’s 18% tax collection growth target is based on assumptions of expanding business activity that is being undermined by tight monetary conditions.
“The SBP’s foreign exchange reserves have risen to $14.46 billion (as of July 18, 2025), but this increase is primarily driven by external borrowing rather than a boost in exports or productivity,” APTMA stated. “Persistently high interest rates are aggravating Pakistan’s debt burden, adding an estimated Rs3 trillion annually in domestic debt servicing.”
The Association urged the MPC to reduce the policy rate to 9% and set a clear roadmap for lowering it further to 6% by December 31, 2025 arguing that “these steps are essential to restore industrial competitiveness, support economic recovery, and generate employment. Pakistan has the capacity and potential for manufacturing and exports but it lacks a monetary policy aligned with national development goals.”
APTMA stressed that a flexible monetary policy, paired with targeted fiscal and regulatory measures, could help address macroeconomic imbalances without stifling growth. “The July 30 MPC decision is pivotal it will indicate whether the central bank is prepared to support economic expansion or continue a policy course that entrenches stagnation.”
“The business community calls on the MPC to prioritize productive enterprise over isolated inflation containment. We remain committed to working with all stakeholders to realize the shared goal of a dynamic and prosperous Pakistan,” the statement concluded.
