The State Bank of Pakistan (SBP) has issued its latest Monetary Policy Report (MPR), detailing the economic developments and outlook that informed recent deliberations of the Monetary Policy Committee (MPC).
The central bank noted that the policy rate was kept unchanged at 11 percent in its June and July meetings, adding that the real policy rate is expected to remain “sufficiently positive” to keep inflation anchored within the medium-term target range.
In the external sector, the MPR projects the trade deficit to widen further during FY26, though steady growth in workers’ remittances is expected to limit the current account deficit to between 0 and 1 percent of GDP. The SBP forecast that projected financial inflows and continued interbank foreign exchange purchases would lift foreign exchange reserves to $15.5 billion by the end of December 2025.
The report anticipates further momentum in economic activity as the impact of earlier interest rate cuts continues to filter through the economy, with real GDP growth projected in the range of 3.25 to 4.25 percent for FY26. At the same time, it cautions that potential domestic and external risks could weigh on the baseline outlook, without identifying specific triggers.
The MPR also highlights five thematic box items covering the lag in monetary policy transmission following the cumulative 1,100 basis point rate cut, summaries of recent cautious monetary moves by major central banks, a guide to interpreting fan charts, and the SBP’s use of alternative data and machine learning to fill gaps in labor market and agricultural statistics.
The central bank described the publication as part of its ongoing efforts to enhance transparency in monetary policymaking and strengthen communication with stakeholders.
