SBP keeps policy rate unchanged at 11pc

Karachi: The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) on Wednesday announced to keep the policy rate unchanged at 11 per cent.

“The MPC has decided to maintain the policy rate at 11%,” said SBP Governor Jameel Ahmad while addressing a press conference.

At its previous meeting on June 16, 2025, the MPC had also kept the policy rate unchanged at 11%, citing expectations of rising inflation in the coming months.

Governor SBP shared that during the last fiscal year, average headline inflation stood at 4.5%, slightly below the target range of 5–7%.

The Monetary Policy Committee has decided to maintain the policy rate at 11%.
For details: https://t.co/NmPNdDRGFG #SBPMonetaryPolicy pic.twitter.com/8V4HWahVO4

— SBP (@StateBank_Pak) July 30, 2025

“Food inflation has reduced significantly, while core inflation has also declined,” he added. He stated that over the past year, there has been a significant reduction in food inflation, accompanied by a gradual decline in core inflation. In June, the core inflation rate dropped to 7.5%, while overall inflation for the month stood at 3.2%.

Ahmad noted that in April, inflation had reached a record low of 0.3% before beginning to rise again. In the last two months, overall inflation has seen an upward trend. He added that inflation is expected to first decline and then rise again in early next year.

He further explained that fluctuations in energy prices have recently been modest; however, their long-term impact may not be favorable and will likely be felt in the next year. The Monetary Policy Committee also reviewed the external accounts situation and, considering all relevant factors, decided to maintain the interest rate at 11%.

The Governor emphasized that external accounts were closely reviewed. In the last fiscal year, imports increased significantly. Imports amounted to $53 billion in FY2024 and rose by 11.1% to $59.1 billion in FY2025.

He said that non-oil imports increased by 16%, indicating a rise in overall economic activity, with sectors outside the oil industry also seeing greater import activity.

He added that the economy grew by 2.7% in the last fiscal year, and this year’s growth is expected to improve further, primarily due to better performance in the agriculture sector. Inflation for the current fiscal year is projected to remain between 5% and 7%.

Jameel Ahmed also noted that exports increased slightly—by just over 4%—which was modest and should have grown more to help reduce the trade deficit.

The Governor stated that remittances performed remarkably well last year, reaching $38.3 billion compared to about $30 billion the previous year—an increase of roughly $8 billion.

He explained that several factors contributed to the rise in remittances, but the key reason was the shift from informal to formal channels. In addition to government incentive schemes, both the interbank market and exchange companies played an important role in this increase.

The Governor concluded by noting that the improvement in remittances was a key reason why the current account recorded a surplus in the last fiscal year. In 2022, the current account deficit was 4.7% of GDP, but due to corrective measures, it dropped to about 1% in 2023. In 2024, the deficit further declined to roughly 0.5% of GDP, eventually turning into a surplus.

He highlighted that this was the first current account surplus in 14 years and the highest in the last 22 years. As a result, Pakistan’s external accounts have stabilized, the State Bank became more active in the interbank market, and the country’s foreign exchange reserves improved significantly.