KARACHI: The State Bank of Pakistan’s Monetary Policy Committee unanimously decided Monday to keep the policy rate unchanged at 11.5 percent, citing an improved macroeconomic outlook tempered by heightened risks from the resurgence of conflict in the Middle East.
The committee assessed that while the macroeconomic outlook has improved since its previous meeting, it remains susceptible to volatility in global commodity prices and uncertain weather conditions.
Headline inflation eased to 11.1 percent in June from 11.7 percent the previous month, primarily due to the pass-through of declining global energy prices to domestic consumers and favorable electricity tariff adjustments. Core inflation also moderated to 8.4 percent but remains elevated.
The MPC expects real GDP growth to range between 3.5 and 4.5 percent during fiscal year 2027, supported by budgetary incentives, continued import tariff rationalization and a pickup in private sector credit. However, risks from volatile global commodity prices and evolving El Niño effects may weigh on growth prospects, the committee said.
Pakistan’s current account posted a deficit of $139 million in fiscal year 2026, close to the lower bound of the projected range. Record workers’ remittances partly offset a widening trade deficit amid the Middle East conflict. The SBP’s foreign exchange reserves surpassed the end-June 2026 target of $18 billion but have since declined to approximately $17.3 billion as of July 17 following substantial debt repayments.
The Federal Board of Revenue achieved its revised tax collection target of Rs13.0 trillion by the end of FY26, and the primary balance remained in surplus for the third consecutive year. The overall fiscal deficit was significantly lower than the previous year.
The MPC reiterated its commitment to achieving price stability and guiding inflation toward the target range of 5 to 7 percent over the medium term. The committee emphasized the importance of further strengthening external and fiscal buffers and accelerating structural reforms to strengthen resilience to recurring shocks and support higher sustainable economic growth.
Inflation is projected to ease gradually and stabilize near the upper bound of the target range by June 2027, subject to risks including volatility in global energy prices, unanticipated adjustments in administered energy prices, unfavorable climate conditions and potential fiscal slippages.