The State Bank of Pakistan has decided to keep the key policy rate unchanged at 11.5 percent during its Monetary Policy Committee meeting, balancing recent improvements in domestic economic indicators against heightened external risks stemming from geopolitical friction in the Middle East. SBP Governor Jameel Ahmad, accompanied by deputy governors of the central bank during a press conference in Karachi, confirmed that the committee unanimously agreed to maintain the current monetary stance. The committee assessed that maintaining the interest rate at 11.5 percent remains appropriate to guide medium-term inflation back toward the central bank’s target range of 5 to 7 percent while sustaining broader macroeconomic stability.
The central bank noted that the country’s macroeconomic outlook has improved, backed by a moderation in headline inflation to 11.1 percent in June and core inflation easing to 8.4 percent. Lower global energy prices and favorable electricity tariff adjustments contributed significantly to the temporary cooling of inflationary pressures. However, SBP officials warned that elevated domestic food prices, higher input costs, and recent surges in global commodity markets could keep inflation elevated over the coming months. Inflation is expected to gradually ease and stabilize near the upper bound of the target range by June 2027 as prudent monetary policies and fiscal consolidation measures take full effect.
Pakistan’s external sector demonstrated relative resilience through the end of the fiscal year 2026, with current account deficits shrinking to 139 million dollars due to record worker remittances offsetting trade imbalances. SBP foreign exchange reserves successfully surpassed the end-June target, reaching over 18 billion dollars. The governor noted that reserve accumulation was aided by consistent foreign exchange purchases, small current account deficits, and the realization of planned official inflows. Standard and Poor’s also upgraded Pakistan’s sovereign credit rating to B, reflecting improved fiscal management, successful tax collection milestones by the Federal Board of Revenue, and stable financial inflows. Looking ahead, SBP targets boosting foreign exchange reserves further to 20.20 billion dollars by December 2026, with worker remittances projected to reach 44 billion dollars.
On the real economy front, high-frequency indicators such as cement dispatches, automobile sales, fertilizer off-take, and satellite imagery point toward a gradual recovery following a brief quarter-four economic slowdown. Supported by budgetary incentives, tariff rationalizations, private sector credit acceleration, and positive spillover effects from the agricultural sector, real GDP growth for FY27 is projected between 3.5 and 4.5 percent. Private sector credit growth accelerated to 14.9 percent, driven by demand across textiles, wholesale trade, telecommunications, and consumer financing. While primary fiscal surpluses and broader structural reforms provide economic buffers, the monetary committee cautioned that volatile commodity markets, Middle East conflict risks, and unpredictable weather patterns could present persistent challenges to national growth prospects.
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