WEBDESK (Azaad English):The State Bank of Pakistan (SBP) has decided to keep the interest rate unchanged at 12 per cent for the next two months, despite a significant drop in inflation to 1.52 per cent in February. Experts had predicted a possible reduction in the rate to boost economic growth, but the SBP opted for a cautious approach.
The central bank highlighted key economic improvements, including a $0.7 billion surplus in the current account for the first seven months of the fiscal year. However, in January 2025, the current account recorded a deficit of $420 million. Pakistan’s foreign exchange reserves remain stable at $15.87 billion, with $11.43 billion held by the SBP.
The Monetary Policy Committee (MPC) noted that inflation fell due to lower food and energy prices, but core inflation remains high. There is concern that any rise in these prices could increase overall inflation again.
Economic activity is improving, with higher sales of automobiles, cement, and petroleum products. However, large-scale manufacturing (LSM) declined by 1.9 per cent in the first half of FY25, mainly due to weaker performance in a few industries. Agriculture showed positive signs, especially after recent rainfall benefited crops. The SBP maintains its GDP growth projection of 2.5–3.5 per cent for the year.
The external financial situation remains a challenge. While imports are rising with economic recovery, financial inflows have been weaker than expected. The SBP expects foreign exchange reserves to reach above $13 billion by June 2025, as most debt repayments for the year have already been made.
The fiscal situation has improved, with higher revenues and controlled spending. However, meeting tax collection targets remains difficult. The SBP emphasized the need for continued financial discipline and tax reforms to support economic stability.
Despite the positive trends, the SBP remains cautious about risks such as global economic uncertainty, potential food price fluctuations, and changes in energy costs. The bank aims to keep inflation stable within its target range of 5–7 per cent while supporting long-term economic growt
