Karachi, August 13, 2025 – The State Bank of Pakistan (SBP), in its flagship Monetary Policy Report (MPR), has projected Pakistan’s real GDP growth to range between 3.25% and 4.25% in the fiscal year 2025-26.
Released on Wednesday, the MPR provides a detailed analysis of macroeconomic developments, risks, and the outlook that shaped recent Monetary Policy Committee (MPC) decisions.
The MPR is a key part of SBP’s ongoing communication strategy, aimed at enhancing transparency in monetary policymaking and improving the understanding of policy considerations among stakeholders. The report notes that with the policy rate unchanged at 11 percent during the MPC meetings in June and July, the real policy rate remains sufficiently positive to help stabilize inflation within the medium-term target range.
On the external front, the MPR anticipates a widening trade deficit in FY26, despite continued growth in workers’ remittances. This could result in a current account deficit between 0 and 1 percent of GDP. Nevertheless, projected financial inflows and SBP’s ongoing interbank foreign exchange purchases are expected to boost the central bank’s reserves to $15.5 billion by December 2025.
Economic activity is expected to gain momentum in FY26, with earlier policy rate reductions continuing to support private sector activity. This growth trajectory, however, is subject to both domestic and external risks, including potential shifts in global commodity prices, geopolitical uncertainties, and climate-related disruptions.
In addition to its growth forecast, the report features five in-depth analytical boxes. The first examines the impact of the 1,100 basis points reduction in the policy rate and explains the lag in monetary policy transmission. The second compares recent cautious monetary stances of central banks in advanced and emerging economies. The third serves as a guide to interpreting fan charts, a tool used to visualize forecast uncertainty. The fourth and fifth explore how SBP is using alternative data sources and machine learning to address gaps and delays in labor market and agriculture sector statistics.
Overall, the MPR underscores a cautiously optimistic outlook for FY26, highlighting opportunities for sustained economic growth while warning of vulnerabilities that require vigilant policy management.