SBP keeps the policy interest rate unchanged at 11%

Pakistan’s State Bank (SBP) has kept the the policy rate unchanged at 11%reporting the short -term financial disorder due to recent rain and floods. The bank has promoted GDP growth for FY2025-26 to remain close to the lower end of the prediction range of 3.25% to 4.25%.

The Central Bank said that while the wider economy remains durable, recent floods have increased the risks to growth and prospects for current transactions as well as the risk of increasing inflation.

In the latest monetary policy statement, SBP warned that flooding damage, especially in the agricultural sector, are likely to slow down economic impulse and exert pressure on food prices, possibly pushing inflation over the official range 5-7%.

Inflation had relaxed in recent months – it was recorded at 4.1% in July and 3% in August – but the Central Bank recorded a renewed uncertainty after crop losses and chain disorders.

Despite external debt repayments, SBP noted that foreign exchange reserves would be firmly in expectations of higher inputs in the coming months. The Central Bank predicted that the Pakistanis Overnight is likely to send increased financial support to families affected by floods – a development that could help promote reserves to $ 15.5 billion by December 205.

However, the current account deficit is expected to expand slightly and remain at a distance of 0 to 1% of GDP, the SBP said. He added that the best access to export markets, especially after US invoice adjustments, can partially offset external pressure from flood -related agricultural losses.

The Central Bank reiterated the importance of maintaining fiscal discipline in the midst of growing government spending on flood relief, warning that the weak revenue could further reduce the policy area.

Despite these challenges, he noted that the steady demand for private sector credit marks a degree of underlying confidence in the economy’s recovery trajectory.