State Bank of Pakistan Keeps Interest Rate Unchanged at 11.50%

The State Bank of Pakistan (SBP) has decided to keep the policy interest rate unchanged at 11.50% following an important Monetary Policy Committee (MPC) meeting chaired by Governor Jameel Ahmad.

During the meeting, the committee reviewed the country's inflation outlook, key economic indicators, and the potential impact of ongoing geopolitical tensions in the Middle East on Pakistan's economy.

Interest Rate Remains at 11.50%

Announcing the latest monetary policy, SBP Governor Jameel Ahmad said the central bank has decided to maintain the policy rate at 11.50% for the next one and a half months.

According to the governor, the decision reflects the current economic conditions and the need to keep inflation under control while supporting overall economic stability.

Inflation Trends Show Mixed Picture

The governor noted that inflation declined gradually during the first six months of the fiscal year, with the average inflation rate remaining around 5.5%.

However, inflationary pressures returned after geopolitical tensions in the Middle East pushed up global petroleum prices, food commodity prices, and shipping costs.

May inflation: 11.7%
June inflation: 11.1%

Inflation Expected to Ease

The State Bank expects inflation to slow in the coming months.

Inflation is expected to decline during July.
A more noticeable slowdown is anticipated after September.
Average inflation for the current fiscal year is projected to remain around 7%.

The governor also stated that Pakistan's domestic economic indicators remain stable, although global geopolitical developments continue to influence inflation. He added that higher wheat prices also contributed to recent inflationary pressure, but inflation is expected to improve significantly by the end of the fiscal year.

Current Account and Remittances

The SBP highlighted improvements in Pakistan's external sector.

Current Account

Last fiscal year's current account deficit stood at US$139 million.
This fiscal year, it is expected to remain between 0% and 1% of GDP.
Future performance will partly depend on developments in the Middle East.

Workers' Remittances

Remittances continued to strengthen Pakistan's external position.

Last fiscal year: US$41.6 billion
Expected this fiscal year: US$44 billion

According to the governor, higher remittance inflows have played a major role in keeping the current account deficit under control.

Exports, Imports and Foreign Exchange Reserves

While exports remained under pressure during the previous fiscal year, the State Bank expects gradual improvement due to:

Government support measures.
Better performance in the IT sector.
Growth in the food sector.

Imports also increased, but improved external financing has helped meet the country's import requirements.

Foreign exchange reserves reached US$20.2 billion by December 2026. The SBP expects reserves to remain around this level through the coming December, with the possibility of further improvement.

External Debt Outlook

Pakistan successfully managed its external debt obligations during the previous fiscal year.

Total repayments last fiscal year: US$26.5 billion.
Some repayments were managed through rollover and refinancing arrangements.
Despite repayments, foreign exchange reserves increased by US$5 billion.

For the current fiscal year:

Total external debt repayments: US$21.5 billion.
Interest payments: Approximately US$3.5 billion.
Principal repayments: Around US$17 billion.

Conclusion

The State Bank of Pakistan has maintained the policy interest rate at 11.50%, reflecting a cautious approach as the country navigates improving domestic economic conditions alongside global uncertainties. Although recent geopolitical tensions temporarily increased inflationary pressure, the central bank expects inflation to ease in the coming months. Strong remittance inflows, a stable external account, and healthy foreign exchange reserves continue to support Pakistan's economic outlook.