S&P Global Market Intelligence expects the State Bank of Pakistan (SBP) to maintain a cautious monetary policy stance in the coming months, despite improving economic indicators, as inflation and external risks continue to cloud the outlook.
Reacting to the SBP’s decision to keep the policy rate unchanged at 11.5% in July, Ahmad Mobeen, Principal Economist at S&P Global Market Intelligence, said the central bank is operating in a more stable macroeconomic environment, supported by easing external pressures and a gradual recovery in economic activity.
However, he said the SBP is unlikely to ease policy aggressively because inflation remains above its target range. He also highlighted renewed tensions in the Middle East, volatile global commodity prices and the possibility of a severe El Niño weather event as key risks that could disrupt Pakistan’s economic recovery.
According to S&P, Pakistan’s external position is also improving, helped by stronger remittance inflows and planned official financing. Nevertheless, the country continues to face sizeable external debt repayments and remains dependent on multilateral inflows and loan rollovers, making prudent economic management essential.
S&P Global Market Intelligence forecasts Pakistan’s economy to grow 3.5% in FY2027, driven by improving macroeconomic fundamentals.
The firm also expects the country’s foreign exchange reserves to increase to $19.5 billion by the end of December 2026, while projecting the current account deficit at 0.7% of GDP in 2026, rising slightly to 0.9% of GDP in 2027.
Despite the improving outlook, S&P cautioned that commodity price volatility and adverse weather conditions linked to a potential El Niño remain the biggest downside risks to Pakistan’s economy.
