ISLAMABAD : Ahead of the Monetary Policy Committee (MPC) meeting on July,30, the All Pakistan Textile Mills Association (APTMA) has called on the MPC to reduce the policy rate to 9% in line with current inflation at around 5%. Maintaining the policy rate at 11% in the current economic environment results in a punitive real interest rate of 6%, which is among the highest in the region.
In contrast, India’s real interest rate stands at 3.4% and China’s at 1.4%. Excessive monetary tightening is undermining Pakistan’s ability to compete regionally and internationally and is stifling domestic business activity. Pakistani industry already faces power tariffs of 12–14 cents/kWh, well above the regional benchmarks of 5–9 cents/kWh and must also cope with financing costs that are double those of competitors. Coupled with unemployment at 22%—far higher than India’s 4.2% and China’s 4.6%—the current monetary policy framework is economically untenable. Further complicating the situation, the Federal Board of Revenue’s 18% tax collection growth target rests on the assumption of increased business activity.
However, current monetary policy actively suppresses the very economic base that generates tax revenue. It is important to note that SBP reserves have increased to $14.46 billion (as of 18th July 2025) primarily through borrowing—not through a rise in exports or domestic productivity. Sustained high interest rates only deepen Pakistan’s debt burden, adding an estimated Rs 3 trillion annually in additional domestic debt servicing costs.
APTMA has strongly urged the MPC to reduce the policy rate to 9% immediately, in line with current inflation and regional benchmarks, and announce a roadmap to further reduce the rate to 6% by December 31. 2025. These steps are essential to restore industrial competitiveness, support recovery, and stimulate job creation. Pakistan possesses substantial manufacturing capacity and export potential. What is lacking is a supportive monetary policy that aligns with the country’s developmental and fiscal objectives.
” APTMA believes that targeted regulatory and fiscal measures with a flexible monetary policy can address imbalances without hampering industrial growth. The July 30th MPC decision is pivotal. It will signal whether the central bank is prepared to enable economic expansion or continue a course that entrenches stagnation. The business asks the MPC to prioritize productive enterprise, not isolated inflation containment. We remain committed to working with all stakeholders to realize the shared goal of a dynamic and prosperous Pakistan,’’ said the Association.
