Pakistan Interest Rate

The State Bank of Pakistan kept its benchmark policy rate unchanged at 11% in October, marking a fourth consecutive hold, citing a stronger macroeconomic outlook and a milder-than-expected impact from recent floods. Real GDP for 2026 has been revised upward to the upper half of the previously projected 3.25–4.25% range, underpinned by robust performance in agriculture and industry, rising domestic demand, and continued private-sector investment. Headline inflation rose to 5.6% in September, driven by flood-related crop losses and energy price pressures, but remains within the central bank’s 5–7% target range. Inflation is expected to temporarily breach the upper bound in the second half of FY26 before returning to target in FY27. Post-flood rehabilitation expenditures are likely to be financed through budgeted fiscal resources. The current account deficit is projected to stay within 0–1% of GDP, while foreign exchange reserves are expected to reach $15.5 billion by December 2025.