Standard & Poor’s (S&P) Global Market Intelligence has forecast additional rate cuts by the State Bank of Pakistan (SBP) for the current fiscal year following the 100bps reduction to 11% announced by the Monetary Policy Committee earlier this week.
In its analysis, S&P noted that the SBP’s decision to lower the policy rate came amid a reduction in headline inflation. With improved inflation dynamics and stronger external balances, the SBP now has room to ease monetary policy further.Â
S&P projects another 100bps cut by the end of 2025, though it anticipates the central bank will proceed cautiously, taking into account global uncertainties such as US tariffs and declining external demand.
The S&P Global-HBL Pakistan Manufacturing Performance Managers’ Index (PMI) for March revealed that while domestic production continued to grow, new export orders contracted for the first time since the survey began in May 2024. Price pressures were reported to have increased due to higher input and energy costs, which could lead to higher output prices in the coming months, contributing to a slight uptick in headline inflation.
S&P also forecasted that SBP reserves are on track to reach $14 billion by the end of June. However, Pakistan’s gross financing needs remain substantial at approximately $27 billion annually, with over $8 billion in external debt repayments due in FY25 and $9 billion in FY26.Â
S&P emphasized that continued progress on the IMF program, along with inflows from bilateral partners and multilateral institutions, will be essential to bridge this financing gap. For FY2025, $16 billion of repayments have been rolled over, with another $1.3 billion to $1.5 billion expected in the remaining months of the fiscal year.
