The State Bank of Pakistan has maintained its policy rate at 11.5%, with the MPC citing rising geopolitical risks, higher commodity prices and persistent supply-side pressures.
The State Bank of Pakistan (SBP) Monetary Policy Committee (MPC) decided to keep the policy rate unchanged at 11.5% at its latest meeting, with seven of the 10 members voting in favour of maintaining the current stance.
The Committee said the prolonged conflict in the Middle East has intensified, pushing already elevated global commodity prices higher and contributing to continued supply-chain disruptions. Despite these risks, recent domestic macroeconomic developments remained broadly in line with the MPC’s expectations.
Headline inflation accelerated to 11.1% year-on-year in August, compared with 9.2% in July. However, core inflation was slightly below the Committee’s expectations. The MPC said external account pressures remained contained, supported by strong workers’ remittances and higher financial inflows.
Economic activity has also started to recover after slowing in the fourth quarter of FY26. Recent high-frequency indicators, including petroleum sales, private-sector credit, textile exports and business sentiment, point towards a gradual improvement in activity.
The MPC expects real GDP growth to remain between 3.5% and 4.5% in FY27, in line with its earlier projection. Improved prospects for rice, sugarcane and cotton production are also expected to support the agriculture sector and broader economic activity.
Reserves Rise Above $21 Billion
Pakistan’s external position has strengthened following the successful issuance of $3 billion in Eurobonds, alongside continued foreign exchange purchases by the SBP. Foreign exchange reserves subsequently increased to $21.4 billion.
The central bank expects resilient remittances and higher ICT exports to help contain the current account deficit between 0% and 1% of GDP during FY27. Reserves are projected to approach three months of import cover by June 2027, although higher global commodity prices remain a key risk.
Pakistan also received a sovereign credit rating upgrade to B3 with a stable outlook from Moody’s, while fiscal consolidation during FY26 exceeded the budget target.
Inflation Risks Remain Elevated
The MPC said recent inflation has largely been driven by food prices, particularly wheat and perishable items, while higher energy costs have increased transport expenses and contributed to core inflation reaching 8.7%.
Inflation expectations among consumers and businesses also increased in September. Nevertheless, the MPC expects inflation to gradually ease towards the upper end of its 5-7% target range by June 2027.
The Committee stressed that geopolitical developments, global commodity prices, electricity and gas tariff adjustments, supply disruptions and adverse weather conditions could increase inflation risks.