SBP Rate Hike Raises Costs for Pakistan’s Textile Exporters
SBP rate hike has drawn criticism from the Pakistan Textile Exporters Association (PTEA), which says higher borrowing costs could put more pressure on textile businesses. The State Bank of Pakistan raised its policy rate by 0.5 percentage points to 12%, according to ProPakistani’s report.
How the SBP rate hike could affect textile exporters
PTEA Chairman Rehan Naseem Bharara said the increase could make working capital more expensive. Working capital helps businesses pay for materials, wages and other day-to-day needs. As a result, higher financing costs may leave exporters with less room to manage routine expenses.
Bharara also said the rate increase could discourage investment and make it harder for Pakistani textile firms to compete with overseas suppliers. However, the effect will vary between businesses. Their borrowing costs depend on their loan terms and the rates charged by their banks.
The policy rate is the central bank’s main monetary policy tool. It influences borrowing costs across the economy, although its effects do not reach every borrower at once. The State Bank of Pakistan explains that monetary policy affects economic activity gradually.
Exporters cite pressure on daily operations
PTEA Vice Chairman Haris Yousaf said exporters already face pressure while financing daily operations and buying raw materials. Therefore, he warned that more expensive credit could add to those challenges.
Yousaf also argued that a sustained fall in exports could affect economic growth and government resources. These are concerns raised by the association; they do not establish that exports have fallen because of this rate decision.
Meanwhile, PTEA called for an export-focused policy that considers the textile value chain as a connected industry. The association said separate measures for different parts of the chain could fail to address the wider cost pressures.
What the rate decision means for businesses
The policy rate is not the same as the rate each company pays on a loan. Banks set lending terms based on factors such as the borrower, loan type and financing arrangement. Consequently, the 0.5-point policy increase does not mean every textile business will see the same change in its borrowing costs.
The rate decision also does not, by itself, show how much textile exports or employment may change. Those outcomes will depend on financing conditions and other costs faced by producers.
For related context, read our report on Pakistan’s latest export figures. The next indicators to watch include official export data and any policy measures aimed at easing costs for exporters.