State Bank of Pakistan Maintains Key Policy Rate

The Monetary Policy Committee has decided to keep the policy rate unchanged at 10.5%. This announcement from the State Bank of Pakistan (SBP) comes as the country grapples with rising inflation and significant changes in fuel prices.

In recent months, the SBP has implemented a cumulative cut of 1,150 basis points in the key policy rate since mid-2024, a notable reduction from a record high of 22 percent in 2023. This easing of monetary policy aims to stimulate economic growth amid challenging conditions.

Pakistan’s economy is currently under pressure, particularly due to its reliance on imported energy, which makes domestic inflation sensitive to fluctuations in global fuel prices. The federal government recently raised consumer prices for diesel and petrol by approximately 20 percent, with the new price of petrol set at Rs321.17 per litre, up from Rs266.17, and diesel now priced at Rs335.86 per litre, increased from Rs280.86.

Governor Jameel Ahmad noted that the economy could grow between 3.75% and 4.75% in the fiscal year 2026, supported by stronger domestic demand and the earlier monetary easing measures. However, the ongoing $7 billion program with the International Monetary Fund (IMF) adds a layer of complexity to the economic landscape.

As the situation evolves, the SBP’s decision to maintain the policy rate reflects a cautious approach in the face of economic uncertainties. The backdrop of escalating geopolitical tensions, particularly the conflict involving the US-Israel and Iran, further complicates the economic outlook for Pakistan.

Details remain unconfirmed regarding any additional measures the SBP may consider in the near future. The formal statement from the Monetary Policy Committee is awaited, which may provide further insights into the central bank’s strategy moving forward.