State Bank Keeps Interest Rate Unchanged at 11% Amid Lower-Than-Expected Inflation

Karachi: The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) has decided to maintain the policy interest rate at 11%, Governor Jameel Ahmad announced on Tuesday. The decision comes in light of a significant reduction in both food and core inflation during the previous fiscal year.
Governor Ahmad stated that the average inflation for the last fiscal year was recorded at 4.5%, which was lower than the government’s and SBP’s earlier expectations of 5% to 7%. Core inflation settled at 7.2%, while overall inflation dropped to 3.2% in June. After reaching a low of 0.3% in April, inflation saw a slight increase in May and June, with moderate upward pressure expected in the early months of the current fiscal year.
He noted that changes in energy prices are likely to influence inflation trends moving forward. The MPC also conducted a detailed review of the external sector, highlighting a surge in imports and remittances.
Imports grew by 11%, rising from $53 billion to $59 billion, largely due to a 16% increase in non-oil imports driven by economic activity. While exports saw a modest growth of 4%, remittances increased significantly by $8 billion. These inflows, now mostly through formal channels, helped the current account move into surplus for the first time in 14 years—marking the highest surplus in 22 years.
In 2022, Pakistan’s current account deficit stood at $17.5 billion, which shrank to just 0.5% of GDP in 2024. Additionally, the SBP played an active role in stabilizing the exchange rate through interventions in the interbank market.
Despite repaying $10 billion out of $26 billion in external debt last year, the country’s foreign exchange reserves rose by $5 billion. The banking sector successfully managed all import and forex needs, according to the SBP governor.