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Karachi, October 27, 2025: The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC) on Monday decided to keep the policy rate unchanged at 11 percent, citing an improved macroeconomic outlook despite a recent uptick in inflation.
Headline inflation rose to 5.6 percent in September, up from 3 percent in August, while core inflation remained steady at 7.3 percent. The MPC noted that the economic impact of recent floods was less severe than initially feared, with minimal supply disruptions and steady agricultural recovery.
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The central bank highlighted that real GDP growth for FY25 had been revised up to 3 percent from 2.7 percent, while major Kharif crop estimates remained close to last year’s output. Additionally, foreign exchange reserves continued to rise despite a $500 million Eurobond repayment, reaching $14.5 billion as of October 17.
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The MPC emphasized that the real policy rate remains adequately positive to anchor inflation within the 5–7 percent target range over the medium term. It also reiterated the need for fiscal discipline, structural reforms, and continued policy coordination to sustain economic stability.
In the real sector, large-scale manufacturing grew 4.4 percent in July–August FY26, supported by higher sales of automobiles, cement, and fertilizer. The current account posted a $110 million surplus in September, narrowing the Q1-FY26 deficit to $594 million. The SBP expects reserves to rise to $15.5 billion by December and $17.8 billion by June 2026.
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On the fiscal side, tax revenues grew 12.5 percent YoY in Q1-FY26, reaching Rs2.9 trillion, though short of targets. The MPC expects fiscal surpluses in both overall and primary balances due to higher non-tax revenues and SBP profit transfers.
While inflation is projected to remain above the target range for a few months, the central bank expects it to stabilize in FY27, supported by easing food and energy price pressures.
