The State Bank of Pakistan released its Monetary Policy Committee analyst briefing presentation for July 2026, confirming that the current monetary policy stance remains appropriate to guide headline inflation toward its medium-term target range of 5 to 7 percent. Despite heightened global oil prices driven by ongoing Middle East conflicts and earlier domestic shocks, headline inflation eased in June while second-round effects remained contained. Updated central bank surveys show that inflation expectations among consumers, businesses, and market analysts continued to moderate further in July. Analysts project one-year-ahead inflation at 7.6 percent and two-year-ahead inflation at 7.0 percent, indicating anchored long-term sentiment.
Economic growth in Pakistan continues to demonstrate gradual and sustainable improvement across major sectors. Central bank data highlights a solid expansion in Real GDP, supported by positive contributions from agriculture, industry, and services. Although Large-Scale Manufacturing experienced a temporary contraction in May due to elevated global energy prices and fiscal austerity measures, high-frequency economic indicators point to a strong rebound in activity during June. Key metrics, including the Purchasing Managers Index and manufacturing capacity utilization, expanded steadily in June and July, remaining aligned with long-term historical averages.
In tandem with the revival of broader economic activity, private sector credit growth witnessed a broad-based recovery by the end of June 2026. Data on business loans reveals strengthening demand for both working capital and fixed investment financing. Consumer financing also registered renewed growth momentum, driven by uptick demand across auto loans, credit cards, personal financing, and house building loans. Outstanding credit to the private sector reached over 11 trillion rupees by mid-July, reflecting improved commercial confidence and liquidity conditions across domestic industrial and retail banking sectors.
On the external front, Pakistan maintained a broadly balanced current account for fiscal year 2026, recording a minor deficit of 0.14 billion dollars or 0.03 percent of GDP. Liquid foreign exchange reserves held by the central bank exceeded target estimates, reaching 17.3 billion dollars as of mid-July 2026. Furthermore, forward liabilities recorded a substantial decline over the fiscal year, significantly strengthening the country’s external sector buffers. The improved macroeconomic stability and prudent monetary-fiscal policy mix contributed to major international rating agencies upgrading Pakistan’s sovereign credit ratings, alongside a sharp drop in sovereign bond yields and five-year credit default swap spreads.
Looking ahead into fiscal year 2027, the central bank projects Real GDP growth to gain further traction within a target range of 3.5 to 4.5 percent. The Monetary Policy Committee reiterated its firm commitment to maintaining price stability, continuing foreign exchange reserve accumulation, and supporting sustained fiscal consolidation. The central bank emphasized that structural economic reforms remain imperative to insulate the national economy against recurring external supply shocks and to preserve long-term fiscal stability.
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