The Pakistan Stock Exchange recorded significant gains after the State Bank of Pakistan (SBP) kept its policy rate unchanged at 11%, citing risks from ongoing floods in Pakistan and inflationary pressures.
According to Dawn, this is the third consecutive meeting where the central bank has held rates steady. The SBP said the benchmark rate was maintained due to supply-side risks and inflation concerns arising from crop damage and disruptions caused by floods in Punjab and Sindh.
KSE-100 Index Gains After Policy Rate Decision
The KSE-100 Index has increased by approximately 945 points following the announcement with significant contributions of Fauji Fertiliser Company, United Bank Limited (UBL), Hub Power and cement companies including DG Khan Cement and Maple Leaf Cement, The Express Tribune reported.
The SBP projected GDP growth for FY26 toward the lower end of its earlier 3.25–4.25% forecast, Devdiscourse reported. Floods in Pakistan are expected to reduce output, especially in agriculture, with potential losses of around 0.2% of GDP.
Inflation eased to around 3% year-on-year in August, but the SBP warned that food prices may push inflation above its 5–7% target range later in the fiscal year. Analysts quoted by Bloomberg said higher spending on flood relief and reconstruction could add pressure on fiscal accounts.
The central bank stated it expects foreign exchange reserves to rise to $15.5 billion by December 2025, supported by inflows. However, Bloomberg noted that crop damage, disrupted exports, and higher import bills could add pressure to the external balance.
Market Analysts on Pakistani Stocks
Market analysts highlighted that Pakistani stocks remain attractive on valuations, with the KSE-100 trading at 7.8× forward earnings compared with a 15-year average of 8.6×. Dividend yields are near 5.8%, according to Dawn.
Investors are monitoring how floods in Pakistan and possible inflation acceleration will impact future SBP decisions. For now, the stable policy rate and strong earnings have kept momentum in the Pakistan Stock Exchange.
