PFC warns rate hike may hurt industry amid war-driven inflation

Islamabad
The Pakistan Furniture Council has expressed concern over the possibility of an increase in interest rates by the State Bank of Pakistan, cautioning that such a move could negatively impact industrial growth, particularly the furniture sector.
PFC Director Shahbaz Aslam said that while controlling inflation is important, raising the policy rate at this stage could further burden businesses already struggling with rising costs due to global uncertainties and war-related disruptions.
According to reports, the central bank is considering an interest rate hike ahead of its upcoming monetary policy announcement on April 27. The move is being discussed in light of increasing inflationary pressures triggered by rising global oil and LNG prices, which have surged significantly in recent weeks.
Shahbaz Aslam noted that higher fuel costs, along with increased freight and insurance charges, have already raised production expenses for manufacturers. “The furniture industry relies heavily on raw materials, transportation, and energy. Any further increase in financing costs will directly affect production and pricing,” he said.
He added that banks may not face major challenges from a rate hike, as a large portion of their profits comes from investments in government securities. However, such a decision would make borrowing more expensive for the private sector, discouraging investment and expansion.
“The private sector is already finding it difficult to access affordable credit. An increase in interest rates will push businesses further away from bank financing, slowing down economic activity,” he warned.
The PFC director also pointed out that Pakistan is still recovering from the economic impact of the recent regional conflict, which has disrupted trade routes and increased energy costs. While the government has assured that fuel supplies will remain stable, prices are expected to rise, adding to inflationary pressures.
He stressed that the timing of any rate hike is critical. “If inflation rises moderately, the central bank should adopt a balanced approach rather than aggressively tightening monetary policy,” he suggested.
Shahbaz Aslam further highlighted that the furniture sector, which has strong potential for exports and job creation, needs supportive policies to grow.
He urged the government to introduce incentives, reduce energy tariffs, and facilitate access to financing for small and medium enterprises.