Karachi, October 27, 2025 – The State Bank of Pakistan (SBP) has decided to keep the benchmark policy rate unchanged at 11 percent during its Monetary Policy Committee (MPC) meeting held on Monday. The decision reflects the central bank’s cautious stance amid rising inflation and global economic uncertainties.
The MPC noted that headline inflation increased to 5.6 percent in September 2025, up from 3.0 percent in August, driven by food and energy price hikes following the recent floods. However, core inflation remained steady at 7.3 percent, suggesting stable underlying price pressures.
Despite the adverse effects of floods, the SBP observed that economic activity has shown resilience, with industrial and agricultural performance exceeding expectations. The MPC highlighted that supply disruptions were minimal and crop losses remained contained, leading to an improved macroeconomic outlook compared to the previous policy review.
Economic Developments
The SBP reported that Pakistan’s real GDP growth for FY25 has been revised upward to 3 percent from 2.7 percent, according to the Pakistan Bureau of Statistics (PBS). Major Kharif crop estimates have remained close to last year’s levels, and foreign exchange reserves have continued to rise despite a $500 million Eurobond repayment, standing at $14.5 billion as of October 17.
Pakistan has also reached a staff-level agreement with the IMF under the Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF) programs, which is expected to further strengthen external financing and investor confidence.
Inflation and Policy Outlook
While the inflation outlook has worsened in the short term, the MPC projects medium-term inflation to stay within the target range of 5–7 percent, supported by fiscal discipline and positive real interest rates. The committee emphasized the importance of maintaining coordinated monetary and fiscal policies to ensure long-term stability and sustainable growth.
External and Fiscal Sector
The current account posted a surplus of $110 million in September 2025, keeping the first-quarter deficit at $594 million, broadly aligning with expectations. Exports maintained steady growth, while imports and remittances showed resilience. The SBP anticipates foreign exchange reserves to reach $15.5 billion by December 2025 and $17.8 billion by June 2026, assuming continued inflows.
On the fiscal side, tax revenues grew by 12.5 percent year-on-year in the first quarter of FY26, reaching Rs 2.9 trillion, although slightly below target. Non-tax revenues also improved due to higher SBP profits and petroleum levy collections.
Conclusion
The SBP reaffirmed its focus on price stability, fiscal consolidation, and structural reforms to foster sustainable economic growth. It emphasized that the 11 percent policy rate remains appropriate to balance inflationary risks while supporting economic recovery and financial stability.