Karachi, March 10, 2025 – The State Bank of Pakistan (SBP) announced on Monday that it will maintain the benchmark policy rate at 12%, citing the need to manage inflationary pressures amid evolving economic conditions.
The decision was taken during the latest meeting of the Monetary Policy Committee (MPC), which assessed that while inflation in February 2025 was lower than anticipated—driven by declines in food and energy prices—the risks of price volatility remain a concern.
The SBP highlighted that core inflation continues to be persistently high, and any resurgence in food and energy costs could lead to an uptick in inflation. Additionally, economic activity in Pakistan is showing signs of growth, as reflected in key high-frequency indicators. However, rising import pressures and weak financial inflows are exerting strain on the external account, which has implications for the policy rate outlook.
The MPC noted that the real interest rate remains adequately positive on a forward-looking basis, supporting macroeconomic stability. However, recent economic data points to emerging challenges. Pakistan’s current account, which had been in surplus for several months, posted a deficit of $0.4 billion in January 2025. This deficit, coupled with sluggish financial inflows and ongoing debt repayments, resulted in a decline in SBP’s foreign exchange reserves.
Despite some setbacks, economic growth remains on an upward trajectory. The SBP reported that while large-scale manufacturing contracted by 1.9% in the first half of FY25, key industries such as textiles, pharmaceuticals, and automobiles showed resilience. Encouragingly, the recent rainfall has alleviated risks to the Rabi crop, supporting the agricultural sector. The SBP maintains its projection for real GDP growth at 2.5% to 3.5% for FY25, anticipating further economic momentum in the latter half of the fiscal year.
On the external front, Pakistan’s current account surplus has narrowed to $0.7 billion for July–January FY25 due to accelerating imports. The rise in global commodity prices and increased demand for imports have exerted additional pressure on the trade balance. However, strong workers’ remittances and moderate export growth have provided some relief. The SBP remains optimistic that foreign exchange reserves will surpass $13 billion by June 2025, aided by lower debt repayments and expected official inflows.
The MPC reiterated its cautious stance on the policy rate, emphasizing the importance of monetary stability in anchoring inflation within the target range of 5–7%. With global economic uncertainties persisting, the SBP stressed the need for fiscal discipline and structural reforms to sustain macroeconomic stability and long-term growth.