The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) on Monday kept the interest rate unchanged at 11.5 per cent.
The decision was announced by SBP Governor Jameel Ahmed during a press conference.
At the outset of the press conference, the governor said, “MPC has decided to keep the policy rate unchanged at 11.5pc”.
“There were several reasons for this, but I would like to explain some background: every time we hold committee meetings in January and July, we also issue projections for the next six months and what would be the level of economic growth, inflation outlook and situation of the external account; I will share that assessment as well.”
The governor explained that in the first half of the previous year, inflation was declining; however, “the fallout from the Middle East crisis impacted our domestic situation”.
“From July to February, our average inflation was 5.5pc,” which he said was within the government’s target range of 5-7pc.
However, due to the Middle East crisis, inflation began to increase, he added. “In June, it was at 11.1pc, and in May, it stood at 11.7pc, and we are hoping that if there is no further escalation, then after one to two months, we will see a decline in inflation,” he said.
“We believe that towards the end of June next year, it will be within the upper band of our target range, either a little over seven or close to seven,” he said, but warned that “there are still risks associated due to the direct impact of the geopolitical situation”.
“Overall, inflation from this (existing) level will see an improvement,” he added.
He also said that food-related inflation such as the recent surge in wheat prices had contributed to overall inflation.
On the external account, he said, “We believe that the current account deficit will remain between 0-1pc” but held that the outcome also depended on the situation in the Middle East.
“We aim to have $20.2bn in foreign exchange reserves till December 2026,” he said, adding that remittances may see a rise as well. “This year, our remittances were $41.6bn, and we now aim that in this year, the amount will be $44bn”.
Exports, the governor acknowledged, “were under a bit of pressure last year” but expected improvement in the next fiscal year, citing “support measures taken by the government in the export sector”.
“In the Roshan Digital account, inflows have increased in the past four to five months, with average inflows of $300m,” he said.
He continued: “The target we had set for June for our foreign reserves was $18bn, and we achieved $18.4bn, which is 400m dollars more than our target.”
He further added that the country’s external debt servicing level had been set at $21.5bn.
“In this, $3.5bn will be interest and $17bn will be the principal amount, from which a major chunk is expected to be rolled over [..] Which leaves a little over $10bn and the actual principal we will pay will be around $7bn.”
Analysts had expected the central bank to keep the rate unchanged, saying it would be difficult to maintain macroeconomic stability with sluggish growth.
Surveys conducted by brokerage houses show that more than 90pc of stakeholders expected the SBP to leave the policy rate unchanged, while only a small number foresaw a modest increase.
The SBP cut its policy rate by 50 basis points to 10.5pc in December 2025 before raising it by 100 basis points to 11.5pc in April this year. It has since kept the rate unchanged despite persistent demands from the business community for a substantial reduction to support economic activity.
More to follow
