State Bank of Pakistan’s Decision

The Monetary Policy Committee has decided to keep the policy rate unchanged at 10.5%. This announcement comes as the State Bank of Pakistan (SBP) navigates a complex economic landscape marked by rising inflation and fluctuating global fuel prices.

The SBP has previously cut the key rate by a cumulative 1,150 basis points since mid-2024, significantly reducing it from a record 22 percent in 2023. This strategy aimed to stimulate economic growth while addressing the challenges posed by external factors.

Pakistan’s economy is particularly sensitive to changes in global fuel prices, as the country imports most of its energy needs. Recently, the federal government raised consumer prices for diesel and petrol by about 20 percent, with petrol now priced at Rs321.17 per litre, up from Rs266.17, and diesel at Rs335.86 per litre, increased from Rs280.86.

Governor Jameel Ahmad noted, “The economy could grow 3.75%–4.75% in FY26, supported by stronger domestic demand and earlier monetary easing.” This optimistic outlook reflects the SBP’s efforts to foster a more resilient economic environment despite ongoing challenges.

Pakistan is currently engaged in a $7 billion programme with the International Monetary Fund (IMF), which adds another layer of complexity to the country’s monetary policy decisions. The IMF’s involvement underscores the need for fiscal discipline and structural reforms to stabilize the economy.

As the SBP continues to monitor inflationary pressures and global economic conditions, details remain unconfirmed regarding any future adjustments to the policy rate. The upcoming formal statement by the Monetary Policy Committee is anticipated to provide further insights into the SBP’s strategy moving forward.

In this context, the SBP’s decision to maintain the policy rate reflects a cautious approach aimed at balancing growth and inflation management amid a challenging economic backdrop.