Islamabad 14 August: The State Bank of Pakistan (SBP) has kept its benchmark interest rate unchanged at 11%, with the Monetary Policy Committee (MPC) citing persistent inflationary risks, external sector vulnerabilities, and global uncertainties despite visible improvements in macroeconomic indicators.
The decision, announced in the Monetary Policy Report (MPR) released on Wednesday, comes as headline inflation eased to 3.2% year-on-year in June, foreign exchange reserves crossed $14 billion, and economic activity showed signs of recovery in key sectors.
According to the MPR, the MPC weighed the following factors before opting to pause:
- Inflation risks remain — While inflation has fallen sharply from last year’s highs, recent increases in energy prices, especially gas tariffs, have raised concerns about a possible rebound.
- Uneven economic recovery — Growth is returning, with gains in manufacturing, agriculture, and services, but the MPC believes earlier rate cuts should be given more time to support momentum.
- External sector pressures — The current account posted a $2.1 billion surplus in FY25, but rising imports and softer global demand could push it into a deficit of 0–1% of GDP in FY26.
- Reserves outlook positive — The SBP projects reserves to reach $15.5 billion by December 2025, supported by IMF-backed reforms and improved market sentiment.
- Global and domestic risks — Geopolitical tensions, commodity price swings, and recent floods continue to threaten price stability and growth prospects.
The central bank stressed that maintaining a positive real interest rate will help anchor inflation within the 5–7% medium-term target while providing a stable environment for investment.
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Real GDP growth is projected at 2.7% in FY25 and between 3.25% and 4.25% in FY26. The SBP reiterated the need for structural reforms and fiscal discipline, warning that sustained growth depends on consistent policies and prudent monetary-fiscal coordination.
“The policy stance reflects a balance between supporting the economic recovery and safeguarding against emerging risks,” the report stated.
The MPC will review the interest rate again in its next meeting, factoring in domestic inflation trends, global commodity prices, and external financing conditions.
📊 SBP Monetary Policy Snapshot
| Indicator | Current / Projection |
|---|---|
| Policy Rate | 11% (unchanged) |
| Inflation (Target) | 5–7% (medium term) |
| Headline Inflation (June) | 3.2% YoY |
| GDP Growth FY25 | 2.7% |
| GDP Growth FY26 | 3.25%–4.25% |
| Current Account FY25 | $2.1bn surplus |
| Current Account FY26 | 0–1% of GDP deficit projected |
| FX Reserves (Current) | $14bn |
| FX Reserves (Dec 2025) | $15.5bn projected |
