Gohar Ejaz Argues Rate Hikes Fail to Address Root Causes of Inflation

Prominent industrialist and former federal minister Gohar Ejaz has publicly argued that Pakistan's reliance on interest rate hikes as the primary anti-inflation tool is fundamentally misguided, asserting that the structural and supply-side drivers of price pressures in the country are not addressable through monetary tightening alone.

Ejaz contended that high policy rates have inflicted severe damage on the industrial and manufacturing sector by raising borrowing costs to levels that make productive investment unviable, without meaningfully reducing the cost-push inflation driven by energy tariffs, taxation, and supply chain inefficiencies. His remarks reflect a widely held view among Pakistani industrialists that the State Bank of Pakistan's monetary framework has prioritised macroeconomic optics over real economic output.

The comments come at a time when Pakistan's policy rate, though eased from its historic peak, remains elevated relative to historical norms, and industrial capacity utilisation continues to be constrained by the cost of financing. Business associations have repeatedly called for more aggressive rate cuts to stimulate economic recovery.

The broader debate over monetary versus structural policy responses to inflation is not unique to Pakistan, but takes on particular urgency in a country where energy subsidies, tax-driven cost inflation, and structural inefficiencies coexist with an IMF programme that has historically pressured the State Bank toward tighter policy stances.