KARACHI: The State Bank of Pakistan on Monday decided to keep the policy rate unchanged in the final meeting of the Monetary Policy Committee (MPC) for the fiscal year 2025.
The current policy rate of the State Bank stands at 11%.
The important meeting, chaired by the Governor of the State Bank took place at the State Bank, where economic indicators were reviewed, followed by the announcement of the new policy rate.
It is worth noting that the State Bank has been reducing the interest rate since June 2024, with a total cut of 11 percentage points across eight meetings held since then.
Meanwhile, the business community had demanded that the interest rate be brought down to single digits.
MPC Statement
“Going forward, inflation is expected to trend up and stabilise in the target range during FY26,” the statement said.
The MPC also noted that economic growth is gradually recovering and is expected to gain further momentum next year, driven by the lagged impact of earlier policy rate cuts.
“At the same time, the Committee noted some potential risks to the external sector amidst the sustained widening in the trade deficit and weak financial inflows.
“Moreover, some of the proposed FY26 budgetary measures may further widen the trade deficit by increasing imports. In this regard, the Committee deemed today’s decision appropriate to sustain the macroeconomic and price stability,” according to the statement.
The MPC cited following reasons to keep policy rate unchanged:
“First, the real GDP growth for FY25 is provisionally reported at 2.7%, and the government is targeting a higher growth of 4.2% for next year.
“Second, despite a substantial widening in the trade deficit, the current account remained broadly balanced in April.
“Third, the revised budget estimates indicate the primary balance surplus at 2.2% of GDP in FY25, up from 0.9% last year. For next year, the government is targeting a higher primary surplus of 2.4% of GDP.
“Lastly, global oil prices have rebounded sharply, reflecting the evolving geopolitical situation in the Middle East and some ease in US-China trade tensions,” read the statement.
“Furthermore, the Committee emphasised the timely realisation of planned foreign inflows, achievement of the targeted fiscal consolidation and the implementation of structural reforms as essential to maintain macroeconomic stability and achieve sustainable economic growth,” the statement concluded.
