The State Bank of Pakistan (SBP) has chosen to keep the policy rate steady at 11 percent, much to the dismay of investors and the business community who were eagerly expecting a potential reduction.
SBP Governor Jameel Ahmad made this announcement during a well-attended press conference in Karachi, where he unveiled the first monetary policy of the fiscal year 2025-26.
During his address, the governor elaborated that the Monetary Policy Committee opted to maintain the interest rate unchanged at 11 percent.
He explained that inflation had seen a resurgence, beginning in April, with a persistent upward trend observed in June and July. Considering the looming possibility of increased electricity prices, the decision to uphold the current interest rate was deemed necessary, he noted.
The inflation rate is expected to remain between 5 to 7 percent, which is within the target range, he added.
“Country’s imports are increasing compared to last year, which is why the current account is likely to remain in deficit,” he added.
Jameel Ahmed also noted that national exports have increased by 4% compared to last year. Additionally, by controlling the exchange rate, remittances have increased by $8 billion.
Speaking on the current account, he said it was in a very poor state in 2022. However, due to gradual improvements, it turned into a surplus after 14 years, reaching a high level. Despite external debt payments, foreign exchange reserves have improved and have now exceeded $14 billion, he maintained.
He stated that the current account deficit could range between zero and one percent. Remittances this year are projected to reach up to $40 billion. As for economic growth, the national GDP could remain between 3.25% and 4.25%, but it will largely depend on the performance of the agriculture sector.