The State Bank of Pakistan (SBP) has kept its key policy rate unchanged at 11.5 per cent, the Monetary Policy Committee (MPC) announced on Monday following its scheduled review meeting.
SBP Governor Jameel Ahmed announced the decision at a press conference, saying the committee had opted to maintain the rate at its current level after weighing inflation trends, growth prospects, and the external account position.
The governor said inflation had been on a downward path in the first half of the previous year, but the fallout from the Middle East crisis disrupted the trend. Average inflation between July and February stood at 5.5 percent, within the governments target range of 5 to 7 percent.
It later climbed to 11.7 percent in May and 11.1 percent in June.
The SBP expects inflation to ease over the coming months if the geopolitical situation does not worsen further, projecting it will fall to around 7 percent or slightly above by the end of June next year. He added that rising wheat prices had also contributed to the recent uptick in food inflation.
On the external account, the governor projected the current account deficit would remain between 0 and 1 percent of GDP, though this outlook depends on developments in the Middle East. The SBP aims to raise foreign exchange reserves to $20.2 billion by December 2026.
Remittances are targeted to rise to $44 billion this year, up from $41.6 billion previously. Inflows through the Roshan Digital Account have averaged $300 million a month over the past four to five months.
The central bank had set a foreign reserves target of $18 billion for June, which it exceeded by reaching $18.4 billion, a surplus of $400 million. External debt servicing has been projected at $21.5 billion, comprising $3.5 billion in interest and $17 billion in principal repayments.
A significant portion of the principal is expected to be rolled over, leaving actual principal payments at around $7 billion.
The governor said Pakistan had shifted away from commercial borrowing toward long-term financing, including three-year eurobonds and multilateral loans, reducing repayment obligations by $4 billion.
Foreign public sector debt, which stood at nearly $100 billion in 2022, has not risen substantially since, while the federal governments foreign debt has remained close to $82 billion. The SBPs forward liabilities have also declined sharply, from $5 billion to $900 million, with plans to convert them into assets by the end of the year.
On economic growth, the governor said the Pakistan Bureau of Statistics (PBS) had estimated GDP growth of 3.7 percent for the previous year, which he expects will be revised upward in line with SBP projections.
Average growth for the first three quarters of the fiscal year, from July 2025 to March 2026, stood at 4 percent, but activity slowed following the Middle East conflict, prompting PBS to lower its fourth-quarter estimate to 3.9 percent. The SBP expects GDP growth this year to fall within a range of 3.5 to 4.5 percent.
Ahead of the announcement, analysts had widely predicted the central bank would hold rates steady, citing the difficulty of preserving macroeconomic stability amid sluggish growth. Brokerage house surveys showed more than 90 percent of stakeholders expected no change in the policy rate, while a small minority anticipated a modest increase.
The SBP had cut its policy rate by 50 basis points to 10.5 percent in December 2025, before raising it by 100 basis points to 11.5 percent in April this year. The rate has remained unchanged since, despite continued calls from the business community for a substantial cut to boost economic activity.
