SBP maintains key interest rate at 11%

Following the Monetary Policy Committee (MPC) meeting, the State Bank of Pakistan (SBP) has kept the key interest rate unchanged at 11%.

The decision was announced by SBP Governor Jameel Ahmed following the MPC meeting on Wednesday.

Addressing a press conference in Karachi, the SBP chief said that while inflation remained at its lowest in April, it rose slightly during May and June, driven largely by energy costs and the base effect.

The governor noted that inflation may rise moderately in the coming months due to continued pressures on energy prices.

On the external front, he said Pakistan’s exports have grown by 4%, adding that a rise in exports is essential to maintain current account stability.

The governor also confirmed a significant increase in worker remittances, which rose by $8 billion and contributed to keeping the current account in surplus.

Highlighting macroeconomic stability, he said the country met all its debt obligations on time and that foreign exchange reserves had increased by $5 billion even after making $26 billion in external payments.

He noted that inflation currently stands at 7.2% and could fluctuate between 5 and 7% during the current fiscal year.

The agricultural sector, he said, is also showing signs of recovery, which should support overall economic growth in the current financial year.

The decision came as the government pushes reforms under a $7 billion IMF programme and a contractionary budget to curb deficits.

In its Economic Outlook Update on Tuesday, the IMF cut its growth forecast for the fiscal year ending June 2026 to 3.6%, well below the government’s 4.2% target.

The SBP held rates in June after a 100-basis-points cut in May that resumed easing following a March pause.

Since June 2024, it has lowered its policy rate by 1,100 basis points from a record 22% as price pressures receded.

In a Reuters poll this week, all 15 analysts said they expected the SBP to ease, with nine forecasting a 50-basis-points cut, four predicting a deeper 100-basis-points reduction and two projecting a smaller 25-basis-points cut.

Headline inflation slowed to 3.2% in June and is projected at 3.5%–4.5% in July, within the SBP’s 5.5%–7.5% target range for the fiscal year ending June 2026.

The government says the economy has stabilised, but analysts warn growth remains fragile and global commodity price swings could still add pressure on prices and external balances.

— With additional input from Reuters

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