SBP keeps interest rate steady at 11%

The State Bank of Pakistan (SBP) kept the policy interest rate unchanged at 11% in its latest monetary policy meeting for FY25.

The State Bank of Pakistan (SBP) kept the policy interest rate unchanged at 11% in its latest monetary policy meeting for FY25. The decision came as inflation slowed to 3.2% in June, mainly due to a drop in food prices. However, the central bank warned that rising gas and fuel prices could push inflation slightly higher in the coming months. Despite these risks, the SBP expects inflation to stay within the target range of 5–7% during FY26, although it may cross the upper limit temporarily.

The SBP observed that economic activity is slowly improving, supported by earlier rate cuts. Indicators like auto sales, fertilizer offtake, and private sector credit show positive trends. Growth in large-scale manufacturing also returned after several months of decline. The real GDP for FY26 is expected to grow between 3.25% and 4.25%, up from 2.7% in FY25. On the external front, the current account posted a $328 million surplus in June, pushing the FY25 total to $2.1 billion. Remittances and official inflows helped build foreign reserves, now over $14 billion. The SBP projects reserves to reach $15.5 billion by December 2025.

The central bank also noted that broad money grew 14% and private sector credit rose 12.8%, showing stronger demand and better business conditions. The government aims for a 2.4% primary budget surplus in FY26 by improving tax collection and cutting unnecessary spending. Meanwhile, the SBP stressed the need to keep financial discipline to maintain macroeconomic stability.

The SBP will continue monitoring inflation risks, including global commodity prices, energy tariff hikes, and weather-related disruptions.