- State Bank keeps the interest rate unchanged in its latest meeting.
- Inflation is expected to stay between 5 and 7% in FY26 and FY27.
- The economy shows improvement, but tax collection remains weak and imports increase.
- Foreign reserves may rise, but debt pressure is still there.
The State Bank of Pakistan (SBP) kept the interest rate unchanged and shared its plan for the economy for the next two fiscal years. It focused on inflation control and steady growth.
The decision came after the Monetary Policy Committee (MPC) meeting held in Karachi on Monday. The SBP decided to maintain the policy rate at 10.5%, going against expectations of the business community.
According to the MPC, inflation may rise above the target range for a few months this year. After that, it is expected to remain between 5 and 7% during FY26 and FY27.
What the Numbers Say
- Headline inflation was 5.6%, and core inflation was 7.4% in December 2025.
- The SBP expects the GDP to grow between 3.75 and 4.75% in FY26.
- In the first quarter of FY26, the economy grew 3.7%, mainly because farming and industry performed better.
- Large-scale manufacturing grew 8% in October and 10.4% in November 2025.
- Overall growth reached 6% during July–November FY26.
- The current account deficit stayed under control due to worker remittances and low global prices.
- December 2025 saw a deficit of $244 million. Imports rose, exports fell, and the trade gap widened.
- Foreign exchange reserves may reach $18 billion by June 2026 and $20.2 billion by December. It is the highest level till now.
- Pakistan must repay $25 billion in debt this year. About $12.5 billion will roll over.
Risks Still on the Table
The SBP said the government is collecting less tax than planned. Because of this, the pressure on the external account remains. Tax collection by FBR grew only 7.3% in December, which is lower than the target.
The IMF has said the world economy may grow a little faster in 2026. Even so, the SBP said Pakistan must control spending and fix its system to avoid future problems.
For now, the central bank says its goal stays simple: stable prices, steady growth, and controlled risks.
