The State Bank of Pakistan (SBP) kept the policy rate unchanged at 11.5 percent in its Monetary Policy Committee (MPC) meeting held today.
The Committee noted that global oil prices have eased following recent positive geopolitical developments but remain above pre-conflict levels. It added that the economic impact of the conflict is now visible in key indicators, as previously anticipated.
Headline inflation rose to double digits in April and May, while core inflation also increased. Economic activity showed signs of moderation due to higher prices, austerity measures, and continued uncertainty. External account pressures, however, remained contained.
The MPC said the macroeconomic outlook remains broadly unchanged from its previous meeting and maintained that the current policy stance is appropriate to guide inflation toward the 5–7 percent target range over the medium term.
Since the last meeting, real GDP growth for FY26 was provisionally estimated at 3.7 percent by the Pakistan Bureau of Statistics (PBS). Consumer and business confidence improved slightly, while inflation expectations eased.
Foreign exchange reserves rose to $17.2 billion as of June 5, 2026, supported by IMF disbursements and external inflows. The government has estimated a primary surplus of 2.5 percent of GDP for FY26 and targets 2.0 percent for FY27.
The Committee also noted that the Middle East conflict is affecting global macroeconomic conditions, prompting policy tightening in several economies.
On growth, large-scale manufacturing posted 6.5 percent growth during July–March FY26 but is expected to slow in Q4. Overall growth is projected to face pressure from external spillovers and weak agricultural prospects due to weather-related risks.
The current account recorded a $0.3 billion deficit in April, bringing the July–April FY26 deficit to $0.2 billion. Higher energy imports widened the trade gap, though strong remittances in May are expected to limit the full-year deficit.
SBP reserves are projected to reach $18 billion by end-June 2026, supported by inflows and FX purchases, despite a likely widening of the current account in FY27.
Fiscal consolidation remained on track during July–March FY26, driven mainly by controlled spending. However, revenue growth slowed, prompting the FBR to revise its FY26 target to around Rs13 trillion. The government still expects to achieve its primary surplus targets for FY26 and FY27.
Broad money (M2) growth eased slightly to 14.3 percent by May 29, driven by slower net domestic assets growth due to reduced government borrowing. Private sector credit grew about 13 percent, while currency in circulation increased due to seasonal Eid-related withdrawals.
Inflation rose from 7.3 percent in March to 10.9 percent in April and 11.7 percent in May, driven by energy prices, supply shocks, and higher food costs. Core inflation also increased to 8.7 percent in May.
The MPC said inflation may remain in double digits in the near term before gradually easing, but risks remain from global prices, fuel pass-through, utility tariff adjustments, fiscal pressures, and food supply shocks.
The Committee reaffirmed its commitment to price stability and said it will continue to monitor incoming data and evolving risks closely.
