Karachi, January 26, 2026 – The State Bank of Pakistan (SBP) on Monday decided to maintain the policy rate at 10.5%, citing concerns over rising inflation and a widening trade deficit.
The Monetary Policy Committee (MPC) emphasized that holding the rate steady is essential to ensure price stability while supporting sustainable economic growth.
In its Monetary Policy Statement, the SBP highlighted that headline inflation stood at 5.6% year-on-year in December 2025, aligning with expectations. However, core inflation remained elevated at 7.4%, reflecting persistent price pressures. Economic activity continues to gain momentum, driven by domestic-oriented sectors such as manufacturing, agriculture, and services, with real GDP growth for Q1-FY26 provisionally reported at 3.7% compared to 1.6% last year.
The SBP also noted that the trade deficit has widened due to higher import volumes and declining exports. Despite this, the current account deficit remains contained thanks to resilient workers’ remittances and relatively stable global commodity prices. FX reserves rose to $16.1 billion as of mid-January 2026, with expectations to surpass $18 billion by June 2026.
The MPC stressed the importance of coordinated monetary and fiscal policies, along with structural reforms, to boost exports and sustain growth. Fiscal consolidation and controlled government expenditures have helped maintain macroeconomic stability, while private sector credit growth continues to support domestic demand.
Looking ahead, the SBP projects inflation to remain within the 5–7% target range for FY26–27, though risks from global commodity volatility, wheat prices, and energy tariffs persist. The central bank’s cautious stance signals a balance between supporting growth and managing inflationary pressures in Pakistan’s evolving economy.