SBP Raises Interest Rate by 100bps: What It Means for Your Business and Loans in 2026

Nobody expected it. After months of rate cuts that had brought Pakistan’s policy rate down from its historic high of 22 percent, the State Bank of Pakistan surprised the market with a 100 basis point hike, pushing the rate back up to 10.5 percent. The reason is straightforward: the US-Iran war has sent oil prices and inflation surging faster than the central bank was willing to tolerate.

The question every business owner and borrower is now asking is simple. What does this actually cost me?

If You Have a Business Loan or Credit Facility

Variable-rate business loans reprice immediately or at the next rollover date. A PKR 10 million facility at the previous rate now costs approximately PKR 100,000 more per year in interest charges. For businesses already squeezed by rising energy and transport costs, this is not a trivial addition. Review your loan agreements this week to understand whether your rate is fixed or floating, and when your next repricing date falls.

If You Have a Home Loan

Islamic home finance and conventional mortgage EMIs on variable-rate products will increase at the next reset. Contact your bank to confirm the exact impact on your monthly payment before it arrives as a surprise on your statement.

The Silver Lining

Higher policy rates mean better returns on savings. Government securities through IPS accounts now yield above 10.5 percent risk-free, rupee-denominated, and accessible to individual investors. If you are holding significant cash in a current account earning zero return, this rate environment makes the move to government securities an immediate and obvious decision.

The Bigger Picture

The SBP’s decision signals that inflation control now outweighs growth support in their priority order. For businesses, that means credit will remain expensive for the foreseeable future. Plan your financing requirements accordingly borrow what is necessary, repay what is optional, and build cash reserves rather than relying on credit lines that are about to cost significantly more.

Reviewed and Written By

Prepared by a qualified Chartered Accountant with Big 4 and banking sector experience. Data sourced from State Bank of Pakistan monetary policy announcement, current as of May 2026.

RAdvisors provides financial advisory and business consultancy for Pakistani SMEs navigating the current economic environment. Contact us here for a free consultation