SBP Maintains Policy Rate
Pakistan’s central bank kept its policy rate unchanged at 11% on Monday, in line with market expectations, citing a stronger growth outlook and easing concerns over flood-related economic disruptions.
According to the Monetary Policy Committee’s (MPC) statement, the State Bank of Pakistan (SBP) now expects GDP growth for FY2025–26 to remain in the upper half of its earlier projection range of 3.25%–4.25%, compared to the lower-end estimate issued in September. The bank noted that the economic impact of last year’s floods is likely to be contained, while agriculture and industrial recovery are proceeding better than expected.
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SBP Governor [verify name] said in a post-meeting briefing that external sector pressures have eased, with the country already repaying $3.1 billion of the $10 billion due for FY26. He added that Pakistan met all performance criteria under the IMF review, and the Fund’s board is expected to approve the next $1.2 billion tranche by December 2025.
The current account deficit is projected to remain modest—between 0% and 1% of GDP—while remittance inflows are expected to surpass $41 billion in FY26, supported by robust inflows from the Gulf region. Over the past three years, the SBP has conducted net foreign exchange purchases exceeding $20 billion to stabilize the domestic market, with continued intervention to manage repayment obligations and liquidity.
Inflation, however, is likely to stay above the upper bound of the central bank’s target range for several months in the second half of FY26, before reverting within range in FY27. The MPC noted that while import volumes have stabilized, any sharp increase in global oil prices could strain the external balance.
Topline analysts said the central bank’s decision reflects cautious optimism as macroeconomic conditions stabilize following last year’s IMF-supported reforms. With Pakistan’s real interest rate now positive and fiscal consolidation under way, the State Bank of Pakistan is expected to maintain its policy stance until clearer signs of disinflation and external stability emerge in the first half of 2026.
