State Bank of Pakistan maintains stance at 11.5% amid easing tensions, stable reserves, and persistent inflation pressures.
KARACHI, June 15, 2026: The State Bank of Pakistan (SBP) on Monday decided to keep its benchmark policy rate unchanged at 11.5 per cent, citing easing geopolitical tensions alongside a still-elevated inflation outlook and mixed macroeconomic signals.
The decision was taken by the Monetary Policy Committee (MPC), which noted that while global oil prices have eased following recent positive geopolitical developments, they remain higher than pre-conflict levels.
According to the central bank, the macroeconomic outlook remains broadly unchanged from the previous meeting, with inflationary pressures persisting but signs of stabilisation emerging in key indicators.
Inflation and Economic Activity Remain Key Concerns
The MPC observed that headline inflation rose to double digits in April and May, while core inflation also edged higher. It added that economic activity is showing signs of moderation due to elevated prices, austerity measures, and ongoing uncertainty.
The committee said that the current monetary policy stance remains appropriate to guide inflation towards the 5–7 per cent medium-term target range, despite near-term pressures.
GDP Growth and Sectoral Performance
The SBP highlighted that real GDP growth for FY26 is provisionally estimated at 3.7 per cent, compared to 3.2 per cent in FY25. Growth was driven mainly by the services and industrial sectors, with agriculture also contributing.
Large-scale manufacturing posted strong growth of 6.5 per cent during July–March FY26, although the MPC expects moderation in the final quarter based on high-frequency indicators.
However, the central bank cautioned that spillover effects from geopolitical tensions, along with subdued agricultural prospects due to challenging weather conditions, may weigh on the FY27 outlook.
External Sector Shows Mixed Trends
The current account recorded a deficit of $0.3 billion in April, bringing the cumulative deficit to $0.2 billion for July–April FY26. This was primarily driven by a widening trade deficit due to higher energy imports.
Despite this, strong workers’ remittances in May are expected to keep the full-year current account deficit within the lower end of projections.
The SBP noted that official inflows and improved external financing have supported foreign exchange reserves, which reached $17.2 billion as of June 5, 2026, and are projected to rise further.
Fiscal Consolidation and Policy Direction
The committee acknowledged continued fiscal consolidation efforts, supported mainly by controlled expenditure. However, revenue growth has slowed compared to last year, prompting a revised Federal Board of Revenue (FBR) target of around Rs13 trillion for FY26.
Despite weaker revenues, the government expects to achieve a primary surplus of 2.5 per cent of GDP in FY26 and is targeting 2.0 per cent in FY27, underscoring continued commitment to fiscal discipline.
The MPC emphasised the importance of sustained structural reforms, particularly tax base expansion and public sector enterprise restructuring.
Money, Credit, and Inflation Outlook
Broad money (M2) growth slowed slightly to 14.3 per cent, reflecting moderation in government borrowing from the banking system. Private sector credit, however, expanded by around 13 per cent, driven by working capital and investment loans.
On inflation, the SBP noted that headline inflation rose sharply to 11.7 per cent in May, driven by energy price adjustments, transport costs, and rising food prices. Core inflation also climbed to 8.7 per cent.
The central bank warned that inflation may remain in double digits in the coming months before gradually easing, subject to risks including global price volatility, domestic tariff adjustments, fiscal pressures, and weather-related food supply shocks.
Policy Outlook
The Monetary Policy Committee reiterated its commitment to price stability and said it will closely monitor incoming data and global developments.
It also stressed that macroeconomic stability will depend on continued fiscal discipline, structural reforms, and prudent monetary management to strengthen resilience against external shocks.
The SBP concluded that maintaining the current policy rate is necessary to balance inflation control with economic stability in an uncertain global environment.
