The State Bank of Pakistan (SBP) interest rate is expected to remain unchanged at 11 percent in the upcoming monetary policy announcement on Monday, September 15. The central bank has held the rate steady since May, when it was last cut to the current level.
Business groups have been urging the SBP to reduce rates further to boost economic activity. However, despite inflation showing a clear decline, the central bank is sticking to a cautious approach. Policymakers fear that recent floods could trigger new price hikes, especially in food items, making it risky to ease policy right now.
A survey by the Chartered Financial Analyst (CFA) Institute found that 92 percent of respondents expect no change in the interest rate. Only a small share of participants, 6 percent, predicted a cut of 50 basis points while just 2 percent foresaw a smaller 25 basis point reduction.
The SBP last policy review also kept the rate unchanged, citing risks from global energy prices and regional tensions, even though local inflation was cooling at the time.
Mohammad Younus, Chairman of the Policy Research and Advisory Council (PRAC), said Pakistan real interest rate, at about 8 percent, is among the highest in the region. For comparison, India stands at 4 percent, Bangladesh at 1.7 percent, China at 3.4 percent and Vietnam at 1.3 percent.
He added that the high cost of borrowing has weakened demand in the economy.
READ MORE: SBP Fixes Interest Rate at 11% Despite Economic Recovery
Over the past decade, Pakistan’s investment-to-GDP ratio has averaged only 0.6 percent, far lower than regional peers like India (1.6 percent), China (1.3 percent), Vietnam (4.6 percent) and Turkey (1.4 percent). Younus described this as an “investment famine” caused by expensive loans, which continue to discourage private-sector growth.
