In a decision closely watched by markets and businesses alike, the State Bank of Pakistan (SBP) announced on July 30, 2025, that it will maintain the benchmark policy rate at 11%. The decision, made by the central bank’s Monetary Policy Committee (MPC), comes despite growing calls from the industrial and business sectors for a rate cut to stimulate growth.
Addressing a press conference following the policy announcement, SBP Governor Jameel Ahmad noted that while macroeconomic indicators have shown improvement — including declining inflation and a stable external sector — the MPC chose a cautious stance in light of ongoing domestic and international uncertainties.
He emphasized that the current policy rate remains appropriate for anchoring inflation expectations and supporting external account stability. According to Ahmad, future monetary decisions will be guided by developments in fiscal policy, global commodity prices, and geopolitical dynamics.
The MPC conducted a comprehensive review of the economic landscape, including sectoral trends, inflation figures, trade activity, fiscal outcomes, and external balances. The committee acknowledged that inflation decelerated to 3.2% year-on-year in June 2025, driven primarily by lower food prices. However, the recent hike in energy tariffs, particularly gas prices, has slightly altered the inflation outlook.
Despite these adjustments, the central bank projects inflation to remain within the 5–7% target range during FY26, although brief deviations above the range may occur due to energy and commodity-related shocks.
Business groups across Karachi, including the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), the Karachi Chamber of Commerce and Industry (KCCI), and the North Karachi Association of Trade and Industry (NKATI), expressed disappointment with the decision. They reiterated their demand for a reduction in interest rates to boost investment, exports, and industrial recovery.
Nevertheless, the MPC highlighted that the real interest rate remains positive, which is critical to stabilizing inflation and preserving macroeconomic balance. The Committee also pointed to other favorable developments: SBP’s foreign exchange reserves rose above $14 billion, Pakistan’s sovereign credit rating improved, and inflation expectations among businesses moderated.
On the fiscal front, tax revenue for FY25 reached Rs11.7 trillion, falling slightly short of the revised target. For FY26, the government is targeting a primary surplus of 2.4% of GDP, with tighter expenditure controls and enhanced revenue collection strategies expected.
Private sector credit growth accelerated to 12.8% year-on-year, driven by strong activity in sectors such as telecommunications, textiles, and wholesale trade. Easing financial conditions also spurred growth in working capital loans, fixed investment, and consumer financing.
The external sector posted a current account surplus of $2.1 billion in FY25, underpinned by robust workers’ remittances. However, the trade deficit is expected to widen in FY26 amid rising import demand and subdued global trade.
The central bank expects reserves to increase further to $15.5 billion by December 2025, supported by improved inflows and investor sentiment following the upgrade in Pakistan’s credit outlook.
While macroeconomic signals point toward a modest recovery, the MPC concluded that structural reforms remain essential to achieving sustained, high growth. For now, monetary and fiscal prudence will continue to shape policy, as authorities aim to balance price stability with economic momentum in a volatile global environment.