KARACHI: The State Bank of Pakistan (SBP) announced that the policy interest rate will remain unchanged at 11%, citing stable inflation and signs of economic recovery.
SBP Governor Jameel Ahmed said the current inflation rate stands at 7.2%, noting a slight uptick in May and June. Last fiscal year’s average inflation was 4.5%, with both food and core inflation decreasing over the period. However, core inflation is expected to edge upward in the coming months.
Pakistan’s exports increased modestly by 4%, while remittances rose by $8 billion, contributing to the country’s first external account surplus in 14 years. Imports also grew by 11%, driven by a 16% rise in non-oil imports, reflecting a pick-up in domestic economic activity.
Despite last year’s surplus, the SBP expects a current account deficit of up to 1% of GDP this fiscal year, mainly due to higher import volumes. Remittances are projected to exceed $40 billion in the current year.
Economic growth is forecast between 3.25% and 4.25%, supported by strong performance in agriculture—boosted by improved rainfall and water availability—as well as in the industrial and services sectors.
Pakistan’s external debt repayments remain significant, with $25.9 billion due this fiscal year. However, reduced interest rates on new loans and extended repayment terms have eased the debt servicing burden. Improved debt sustainability has led to upgrades in Pakistan’s credit rating by international agencies.
Governor Ahmed highlighted that the SBP and government successfully managed external payments last year, with $10 billion in repayments made while still increasing reserves by $5 billion. Foreign exchange reserves currently exceed $14 billion—surpassing Pakistan’s immediate debt obligations—and are expected to rise to $15.5 billion by December, with a target of $17.5 billion by June 2026. The issuance of Eurobonds could further bolster reserves.
The SBP continues to regulate two formal foreign exchange markets—the interbank market and exchange companies—and intervenes when necessary to stabilize the exchange rate. Illegal currency trading remains outside the SBP’s jurisdiction and is handled by law enforcement agencies. Any intelligence related to unlawful activity is promptly shared with relevant authorities.
To combat gold smuggling, the government plans to implement strict nationwide measures. Additionally, new policy actions will be introduced to enhance remittance flows, while existing support programs for overseas Pakistanis will continue. Law enforcement agencies have been tasked with curbing illegal financial practices.
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