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KARACHI, June 15, 2026: The State Bank of Pakistan (SBP) on Monday kept its key policy rate unchanged at 11.5%, citing a stable macroeconomic outlook despite rising inflation, slowing economic activity, and uncertainty linked to the prolonged Middle East conflict.
Announcing its latest monetary policy, the Monetary Policy Committee (MPC) said the current policy stance remains appropriate. It expects the rate to guide inflation toward the medium-term target of 5-7% while preserving macroeconomic stability.
Meanwhile, inflation continued to rise. Headline inflation increased to 10.9% in April and 11.7% in May, driven by higher energy prices, rising transport and production costs, and an unexpected increase in wheat prices. In addition, core inflation edged up to 8.7% in May.
Furthermore, the MPC noted that global oil prices have eased after recent geopolitical developments. However, they remain above pre-conflict levels. It added that the impact of the Middle East conflict has started affecting Pakistan’s economy through higher prices, weaker demand, and increased uncertainty.
According to provisional estimates from the Pakistan Bureau of Statistics (PBS), the economy grew 3.7% in FY26, compared with 3.2% a year earlier. The services and industrial sectors drove the improvement. However, the SBP warned that growth could slow in FY27 due to regional tensions, weak agricultural prospects, and adverse weather conditions.
On the external front, the central bank described the situation as manageable. Although the current account posted a $0.3 billion deficit in April, strong workers’ remittances and official inflows supported external stability. Consequently, SBP’s foreign exchange reserves increased to $17.2 billion as of June 5 and are expected to reach $18 billion by the end of June.
Moreover, the MPC welcomed the successful completion of Pakistan’s reviews under the IMF’s Extended Fund Facility (EFF) and Resilience and Sustainability Facility (RSF). It said these developments have strengthened external financing and improved investor confidence.
On the fiscal side, the committee noted that the government remains committed to fiscal consolidation. It aims to achieve a 2.5% primary surplus of GDP in FY26 and 2% in FY27. At the same time, the MPC urged authorities to broaden the tax base and accelerate reforms of state-owned enterprises.
Meanwhile, private sector credit grew by around 13%, supported by higher borrowing for working capital, fixed investment, and consumer financing. However, broad money growth slowed to 14.3% in late May.
Looking ahead, the SBP expects inflation to remain in double digits over the coming months before easing gradually. However, it warned that risks remain elevated due to geopolitical tensions, global commodity prices, domestic energy tariff adjustments, fiscal pressures, and weather-related food inflation.
Finally, the MPC reaffirmed its commitment to maintaining price stability. It said the central bank will continue to monitor economic developments closely while emphasizing that faster structural reforms remain essential to strengthen economic resilience, improve productivity, and support sustainable long-term growth
