SBP bi-annuals report projects inflation within 5–7% range, GDP growth up to 4.75% in FY26

State Bank of Pakistan on Sunday released its bi-annual Monetary Policy Report, stating that Pakistan’s macroeconomic conditions and outlook have improved, supported by a prudent monetary policy stance and continued fiscal consolidation.

According to the report, inflation is projected to remain within the central bank’s 5–7% target range during most of FY26 and FY27, despite some near-term volatility. The current account deficit is expected to stay contained at 0–1% of GDP in FY26, as higher trade deficits are partly offset by strong workers’ remittances and planned official inflows.

The SBP said its foreign exchange reserves are projected to rise to $18 billion by June 2026 and increase further in FY27, reaching close to three months of import cover. Economic activity has strengthened amid macroeconomic stabilisation, easing financial conditions and a recent reduction in the Cash Reserve Requirement to 5%, leading the central bank to revise its real GDP growth projection for FY26 to 3.75–4.75%, with higher growth expected in FY27.

The report also flagged risks to the outlook, noting that while the risk of widespread economic disruption from recent floods has receded, uncertainty from global tariff-related developments and volatility in international commodity prices persists. Domestically, below-target revenue collection and potential adverse climate events remain key risks for inflation, the external account and growth.

The SBP emphasised the need to accelerate structural reforms to improve economic resilience, raise productivity and reduce losses in state-owned enterprises. The report also included analytical sections on monetary policy transmission following earlier policy rate cuts, the use of heat maps to assess economic activity, and the role of surveys and structured engagement with private-sector stakeholders in monetary policy formulation.