KARACHI, Jan 26 (APP): To ensure price stability and support sustainable economic growth, State Bank of Pakistan (SBP) kept the policy rate unchanged at 10.5 percent owing to rising inflation expectations and widening trade gap and current account deficit.
The Governor SBP, Jameel Ahmad, Monday addressing a press conference along with Deputy Governors of the central bank, announced the decision of the Monetary Policy Committee as well as projections for growth, inflation outlook, current account situation and other key economic indicators. He also announced reduction in the Cash Reserve Requirements of the banks.
Highlighting the reasons to maintain the policy rate at 10.5%, he stated that stickiness in Core Inflation and forward looking outlook indicate an uptick in inflation in coming months but those will reverse shortly. Though trends in remittances remained encouraging and supportive to the external account, a rise has been witnessed in imports while exports decreased during the first half of FY26, he added.
On the other hand, the positive impacts of the significant monetary ease given in previous years have started surfacing now and growth is picking up, Jameel Ahmed said and added that rise in high frequency indicators and growth in large scale manufacturing is being supported by improved prospectus of services and agriculture sectors in the current financial year.
The central bank has upgraded its GDP Growth outlook for FY26 by 0.5% to a range between 3.75% – 4.75% and even its lower range i.e 3.75% is better than average annual growth of the previous 30 years, he said and added that inflation is projected to remain in range of 5 – 7%, current account at 0 to 1% during FY26.
The continued measures by SBP and the government had helped overcoming the volatility in reserves and liquid foreign exchange reserves witness significant increase despite loan repayments, he noted, adding that the SBP reserves currently standing at $16 billion will cross $ 18 billion by end of FY26 and may touch the 20 billion mark by end of the calendar year 2026.
The SBP Governor said that Pakistan has successfully managed its debt and liabilities during the previous and ongoing fiscal year while no increase has been noted in the external debt since four years as it is maintained at $100 billion from the year 2022 despite acquiring new loans.
However, a positive shift has been made in the composition of loans by increasing the ratio of long term and bilateral loans, he explained, adding that Pakistan’s loan repayment capability has enhanced and international credit ratings improved. Besides, we have built up our exchange reserves through domestic buying which helped us repay loans, he added.
Pakistan had to settle $25.7 billion external debt in FY26 and out of them $ 7 billion have been rolled over and $ 5.7 billion repaid and we are confident to manage the remaining roll over, refinancing and repayment arrangements, he stated.
The governor also announced that SBP has decided to lower the Cash Reserve Requirements from the current fortnightly and daily Cash Reserve Requirements for the banks from 6% to 5% and 4% to 3% respectively. This step will improve the credit lending capabilities of the banks and facilitate the private sector.
Responding to a query about issuance of new design currency notes, he informed that SBP, after working on recommendations of the cabinet committee, has resubmitted the designs of various denominations of currency notes. As soon as the central bank gets the approval, it will start the processes of printing and issuance in a planned manner.