KARACHI, July 30, 2025 — The State Bank of Pakistan (SBP) announced Tuesday that it will keep the policy interest rate unchanged at 11%, citing stable inflation and encouraging signs of economic recovery.
SBP Governor Jameel Ahmed stated that inflation currently stands at 7.2%, with only a slight uptick noted in May and June. The average inflation for the previous fiscal year was 4.5%, with both food and core inflation showing a downward trend — though core inflation may rise slightly in the coming months.
External Accounts Strengthen
Governor Ahmed highlighted improvements in Pakistan’s external account, with exports up 4% and remittances increasing by $8 billion, helping the country achieve a current account surplus for the first time in 14 years. However, due to a projected increase in imports, the SBP expects a current account deficit of up to 1% of GDP this fiscal year.
Remittances are forecast to cross $40 billion this year. Imports have also risen by 11%, driven largely by non-oil imports, which grew 16% — a sign of rising domestic demand.
Growth Outlook
The SBP projects GDP growth between 3.25% and 4.25% for the current year. Favorable weather conditions are expected to boost the agriculture sector, while industrial and services sectors are also showing signs of recovery.
Debt and Reserves
Pakistan faces $25.9 billion in external debt repayments this year, but the SBP noted that debt servicing costs have fallen due to lower interest rates on new borrowing and longer repayment terms.
Foreign exchange reserves have climbed to over $14 billion, with projections to reach $15.5 billion by December 2025 and $17.5 billion by June 2026. The issuance of Eurobonds could further bolster these reserves.
Exchange Rate and Currency Market
The SBP continues to intervene in the interbank market to stabilise the rupee and ensure foreign exchange availability for importers. Governor Ahmed also acknowledged the presence of illegal currency markets, which fall outside the SBP’s purview but are monitored by law enforcement agencies. The central bank cooperates with authorities to address any irregularities.
Policy on Remittances and Gold Smuggling
New policy actions will be introduced to enhance remittance flows, and strict national-level measures will be implemented to curb gold smuggling, which remains a key concern for external accounts.
Governor Ahmed reiterated the SBP’s and government’s commitment to macroeconomic stability, debt sustainability, and currency market transparency, pointing to recent credit rating upgrades as a vote of confidence from global financial institutions.
