The State Bank of Pakistan’s (SBP) Monetary Policy Committee (MPC), in its first meeting in fiscal year 2026-27, decided on Monday to keep the policy rate unchanged at 11.5 percent, reported 24NewsHD TV channel.
The announcement was made by SBP Governor Jamil Ahmad at a news conference in Karachi.
The MPC met for the fifth time this year. The decision was in line with market expectations.
In the previous MPC meeting held on June 15, 2026, the central bank’s MPC decided to maintain the policy rate at 11.5 percent, stating that the current monetary stance remains appropriate to steer inflation towards the medium-term target range of 5-7%.
The policy rate has remained at 11.5 percent since April, when the Committee raised it by 100 basis points to 11.5 percent, effective April 27, 2026, citing heightened risks to Pakistan’s macroeconomic outlook arising from the intensifying Middle East conflict.
In its subsequent meeting in June, the MPC decided to maintain the policy rate at the same level.
The Committee is expected to maintain the status quo, reflecting the SBP’s cautious approach amid evolving domestic and external economic conditions, analysts said.
They noted that geopolitical tensions in the Middle East have escalated once again, while rising volatility in global oil prices poses risks to Pakistan’s economic outlook. Given these uncertainties, the MPC is most likely to keep the policy rate unchanged.
The MPC noted that proactive policy management and fiscal consolidation had helped absorb the ongoing supply shock and preserve stability. It reiterated its commitment to bringing inflation into the 5-7 per cent medium-term target range and said the current stance remains appropriate.
Key positive developments since the last meeting included SBP foreign exchange reserves surpassing the end-June target of $18 billion, an upgrade of Pakistan’s sovereign credit rating to “B” by Standard & Poor’s, easier inflation expectations among consumers and businesses, and the Federal Board of Revenue meeting its revised tax target for FY26.
The IMF, however, raised its global inflation forecasts for 2026 and 2027 amid higher commodity prices. Real GDP growth is projected in the range of 3.5-4.5 per cent for FY27, supported by better agriculture prospect, particularly a significant rise in expected sugarcane output, budgetary incentives, continued tariff rationalisation and rising private-sector credit. Risks from volatile global commodity prices and uncertain weather, including El Niño effects, remain.
The current account recorded a modest deficit of $139 million in FY26. Workers’ remittances helped contain the impact of a wider trade deficit. Reserves stood at around $17.3 billion as of July 17 after debt repayments, with a target of $20.2 billion by end-December 2026. The current account deficit is expected to stay between 0 and 1 per cent of GDP in FY27.
On the fiscal side, the primary balance is estimated to have remained in surplus for a third consecutive year, while the overall deficit narrowed significantly. For FY27, a primary surplus of 2.0 per cent of GDP and an overall deficit of 3.6 per cent are targeted.
Private-sector credit growth accelerated to 14.9 per cent, with broad-based demand across working capital, fixed investment and consumer financing. Broad money growth moderated to 13.2 per cent.
Looking ahead, the committee expects inflation to remain above the target range in the near term due to higher global commodity prices, input costs and domestic food pressures, before easing gradually towards the upper end of the 5-7 per cent band by June 2027. It stressed the need to strengthen external and fiscal buffers and accelerate structural reforms to build resilience and support sustainable growth.
While announcing the decision during a press conference, SBP Governor Jameel Ahmed said inflation had declined gradually during the first six months of the year, averaging 5.5% between July and February, remaining at the lower end of the SBP's target range.
He said the conflict in the Middle East had pushed up petroleum and global commodity prices from early March, increasing inflationary pressures through higher fuel prices and shipping costs.
As a result, inflation accelerated to 11.7% in May before easing to 11.1% in June. The SBP expects inflation to decline further in July and continue moderating after September, he added.
He added that higher wheat prices had also contributed to inflationary pressures.
On the external sector, Ahmad said Pakistan recorded a current account deficit of $139 million during the last fiscal year, compared with a $17.5 billion deficit a year earlier. He said the current account balance was expected to remain between 0% and 1% of GDP during the current fiscal year, although the outlook would depend on developments in the Middle East.