PIAF Calls for Balanced Monetary Policy to Support Growth and Ease Production Costs

By Farzana Chaudhry
Lahore, Pakistan

LAHORE: The Pakistan Industrial and Agricultural Forum (PIAF) has urged the government and the State Bank of Pakistan to adopt a balanced monetary policy, warning that prolonged high interest rates could raise production costs, discourage investment, and slow economic growth.

PIAF Chairman Faheemur Rehman Saigol, accompanied by Senior Vice Chairman Nasrullah Mughal and Vice Chairman Tahir Manzoor Chaudhary, stressed that while controlling inflation is crucial, policies driven solely by external pressures, such as IMF recommendations, risk undermining industrial and agricultural competitiveness in domestic and export markets.

Faheem Saigol noted that the State Bank’s decision to maintain the policy rate at 11 percent is understandable given ongoing inflation and external vulnerabilities. However, he cautioned that persistently high borrowing costs are placing a heavy burden on businesses and farmers. Sectors reliant on seasonal financing, working capital loans, and long-term industrial credit are particularly affected, as higher interest rates feed directly into increased production costs.

Nasrullah Mughal highlighted that Pakistan’s economy is already grappling with flood-related supply disruptions, rising energy costs, and volatile input prices. “Industries and agricultural producers are managing these shocks while facing higher financing costs due to elevated interest rates, squeezing margins, reducing output, and ultimately raising consumer prices,” he said.

Vice Chairman Tahir Manzoor Chaudhary emphasized that a blanket high-interest policy can slow capital formation and deter investment in critical sectors. He urged targeted measures, including concessional loans for key industries and agriculture, to ensure production continuity without compromising overall monetary discipline. “Selective support can stimulate growth in employment-generating and export-oriented areas while keeping inflationary expectations anchored,” he added.

The PIAF leadership also stressed the importance of policy predictability, noting that uncertainty over interest rates or abrupt changes in monetary stance disrupts investment planning and long-term projects.

Faheem Saigol warned that external pressures, including IMF loan conditions, should not dictate domestic economic priorities. Policies driven primarily by donor requirements often result in higher utility tariffs, increased costs for industries, and greater financial burdens on consumers. “Excessive reliance on external prescriptions risks stalling economic recovery and discouraging domestic entrepreneurship,” he said.

Nasrullah Mughal added that structural reforms in the energy and financial sectors are essential to complement monetary measures. He called for initiatives to reduce line losses, improve billing and recoveries, and enhance liquidity for small and medium enterprises and farmers. These steps, he said, would mitigate the negative impact of high interest rates and maintain production under tighter monetary conditions.

Tahir Manzoor Chaudhary urged investment in low-cost energy, hydropower, renewable energy, and efficient irrigation infrastructure. He said affordable and reliable energy is key to revitalizing manufacturing and agriculture, enhancing export competitiveness, and stabilizing domestic prices.

Faheem Saigol concluded that while tight monetary measures are necessary to anchor inflation in the short term, complementary policies are essential to support production, investment, and economic growth. The PIAF leadership emphasized that without affordable credit, lower production costs, and a clear growth-oriented policy, industrial and agricultural recovery will remain constrained, undermining employment, exports, and overall economic stability.

The forum reaffirmed its commitment to collaborating with policymakers and the business community to implement practical solutions that balance price stability with growth, ensuring sustainable economic development for Pakistan.