State Bank of Pakistan (SBP) Governor Jameel Ahmad announced that the decline in the key policy rate to 13% will save the government Rs1.5 trillion in interest payments during the current fiscal year (FY25).
While speaking to a private news channel, the SBP governor said that this saving will support the government in achieving its fiscal deficit target of 6%.
“When the budget was formulated, the projected policy rate was 22%. With the policy rate now reduced to 13%, and government borrowing occurring at around 12%, we estimate the budgeted interest payments of Rs9.8 trillion will drop to Rs8.3 trillion,” Ahmad explained.
The SBP governor’s remarks follow the Monetary Policy Committee’s (MPC) decision on Monday to reduce the key policy rate by 200 basis points, marking the fifth consecutive rate cut since June 2024, when the rate stood at 22%.
The MPC said in its statement that headline inflation eased to 4.9% year-on-year in November 2024, driven by declining food inflation and the diminishing impact of gas tariff hikes introduced a year earlier. Core inflation, however, remains sticky at 9.7%, while inflation expectations remain volatile.
The MPC highlighted that its measured policy rate cuts are balancing inflationary pressures and external account stability, supporting sustainable economic growth.
In a post-MPC briefing, the SBP disclosed that Pakistan’s external debt obligations for FY25 are estimated at $26.1 billion, including $22.1 billion in principal repayments and $4 billion in interest. As of now, $10.4 billion, including $5.4 billion in rollovers, has been settled or rescheduled.
The central bank expects a significant portion of the remaining debt to be rolled over, with $5 billion projected to be repaid during the rest of FY25.
Ahmad further stated that under the International Monetary Fund (IMF) programme, Pakistan’s bilateral partners have assured both the government and the IMF of their commitment to rolling over deposits through June 2027, supporting the country’s external financing needs.
