The State Bank of Pakistan has decided to maintain the interest rate, which will remain at 10.5% for the next one and a half months.
the Monetary Policy Committee (MPC) of the State Bank held a meeting today to determine the policy rate.
After the meeting, SBP Governor Jameel Ahmed held a press conference in which he announced the decision regarding the interest rate.
The Governor also announced that the cash reserve requirement for banks will be reduced by 1%, setting it at 5%.
According to the Monetary Policy Committee:
Inflation in December remained stable at 5.6%, while core inflation was 7.4%.
Economic growth exceeded expectations and is projected to reach 4.75% in fiscal year 2026.
Imports increased, which raised the trade deficit, but the current account deficit remained under control.
Foreign exchange reserves stood at $16.1 billion, expected to exceed $18 billion by June.
Private sector borrowing showed a significant increase.
The FBR revenue target fell short by Rs 329 billion.
For banks, the cash reserve ratio has been reduced from 6% to 5%.
The MPC expects inflation for the current fiscal year to remain within the 5–7% target range.
Private sector borrowing increased by Rs 578 billion.
In December 2025, the current account deficit was $244 million, while in the first half of the fiscal year, the total deficit was $1.2 billion.
The main reasons for the deficit were rising imports and declining exports, though remittances and ICT exports helped control the deficit.
The current account deficit for this fiscal year is expected to remain between 0–1% of GDP, and foreign exchange reserves may exceed $18 billion by June 2026.
It is worth noting that in the previous monetary policy review, the SBP had cut the policy rate by 50 basis points to 10.5%.
The policy rate has remained in double digits for the past 4 years, and experts say that bringing it into single digits sends a clear message of economic recovery and stability, which is expected to boost business activity and investment.
In the first quarter of this fiscal year, GDP growth was 3.7%, compared to 1.6% in the same period last year.
Growth was supported by increased auto sales, cement, POL products, fertilisers, and machinery imports.
From July to November, LSM (Large Scale Manufacturing) grew by 6%.
Wheat crop prospects are encouraging.
Also Read: Pakistan economy stabilizes, investor confidence rises: Bloomberg
