Business Desk 
Jun 16, 2025
A general overview of the State Bank of Pakistan's (SBP) building. — Geo.tv/File
The State Bank of Pakistan (SBP) has announced to maintain the benchmark interest rate at 11%, as the Monetary Policy Committee (MPC) assessed that economic recovery is gradually gaining momentum.
In its policy statement, the SBP stated that the recent uptick in inflation, with headline inflation rising to 3.5% year-on-year in May, was broadly in line with projections.
Meanwhile, core inflation eased slightly and inflation expectations among businesses and households declined.
The central bank stated: “The Committee expects inflation to inch up in the near term before stabilising within the target range of 5–7% during FY26.”
While acknowledging the strengthening domestic economic activity, the MPC also flagged potential risks to the external sector, particularly due to the persistent widening of the trade deficit and subdued financial inflows.
Fiscal performance improves
The revised fiscal estimates for FY25 show an enhanced primary surplus of 2.2% of GDP, up from 0.9% a year earlier.
For FY26, the government has set an ambitious target of 2.4%. The MPC underscored the importance of timely reforms — including broadening the tax base and restructuring public sector enterprises — to achieve sustained fiscal consolidation.
Credit expansion and inflation outlook
Private sector credit raised by around 11% as of May 30, led by strong demand in the textile, telecom, wholesale and retail sectors. Consumer finance also picked up significantly amid easing financial conditions.
Regarding inflation, the Committee stated the increase in May reflected a fading favourable base effect and persistent core inflation, though global energy prices remained low.
“The impact of budgetary measures on inflation is expected to be limited,” the MPC said, noting that while some volatility is likely in the near term, the outlook remains within the 5–7% target.
