Karachi: The State Bank of Pakistan (SBP) on Monday announced its new monetary policy, keeping the benchmark interest rate unchanged at 11 percent for the next six weeks the fourth consecutive decision to maintain the rate at its current level.
In its policy statement, the central bank said the decision reflects the need to ensure price stability and manage pressures on the rupee amid limited foreign inflows. The SBP noted that while inflation has slightly increased due to recent flood-related disruptions, maintaining the current rate is necessary to preserve macroeconomic stability.
Analysts, however, say the move signals continued concern over Pakistan’s fragile external position. Despite improvements in headline inflation, foreign investment both in the form of direct investment and external borrowing remains well below the country’s financing needs.
“The SBP’s main objective appears to be defending the rupee’s artificial stability rather than stimulating growth,” said one Karachi-based economist. “By keeping rates high, the government is effectively locking in domestic borrowing costs to finance a fiscal deficit exceeding PKR 7 trillion, while the private sector continues to suffer.”
The business community had urged the central bank to cut the policy rate by at least two percentage points to 9 percent, arguing that the high cost of credit is stifling economic activity and exacerbating unemployment and poverty.
The SBP’s Monetary Policy Committee (MPC) last revised the rate in May, when it cut the policy rate by one percentage point to 11 percent. Since then, the MPC has adopted a cautious stance, balancing inflationary risks with the need to support a struggling economy.
Market sentiment remains subdued, with most traders having already priced in the expectation of no change. Economists now believe any meaningful rate reduction may only come once external inflows improve and fiscal consolidation gains traction.
