What happened
The State Bank of Pakistan (SBP) left its benchmark policy rate unchanged at 11.5 per cent on 27 July, with Governor Jameel Ahmad saying the Monetary Policy Committee had decided unanimously to hold rates after assessing the macroeconomic outlook, Dawn reported.
The SBP said the outlook had improved from its previous meeting, “though it remains susceptible to heightened risks, particularly following the resurgence of conflict in the Middle East”. It said geopolitical tensions in the Middle East, volatile commodity prices and weather-related risks continued to warrant a prudent monetary policy stance.
Inflation and growth
The central bank said higher global commodity prices, increased input costs and domestic food-price pressure were likely to keep inflation above its 5–7 per cent target range over the next few months. It projected inflation to ease gradually and stabilise near the upper bound of the target range by June 2027. Inflation stood at 11.1 per cent in June.
The SBP expected real GDP growth of 3.5–4.5 per cent in FY27, while warning that volatile global commodity prices and uncertain weather, including an evolving El Niño, could weigh on prospects. It said economic activity had slowed in the fourth quarter of FY26 because of the Middle East conflict, a surge in global energy prices and government austerity, but that high-frequency indicators — including automobile sales, cement dispatches and fertiliser offtake — pointed to a recovery in June.
The external and fiscal accounts
The current account posted a deficit of $139 million in FY26, near the lower bound of the projected range, as record workers’ remittances partly offset a widening trade deficit. The SBP expected the deficit to widen but remain between 0 and 1 per cent of GDP in FY27.
The Federal Board of Revenue met its revised tax-collection target of Rs13 trillion for FY26, and the primary balance is estimated to have stayed in surplus for a third consecutive year, with the overall fiscal deficit significantly lower than a year earlier. For FY27 the government is targeting a primary surplus of 2 per cent of GDP and an overall deficit of 3.6 per cent of GDP.
Reaction
Business groups were divided. The Overseas Investors Chamber of Commerce and Industry called the pause prudent and balanced, while the Federation of Pakistan Chambers of Commerce and Industry criticised what it called a “contractionary” stance, warning that elevated borrowing costs would undermine industrial revival. Local chambers called for a single-digit policy rate.
What is still uncertain
The SBP said the outlook depended on agricultural performance, the El Niño weather cycle and geopolitical developments. Global oil prices and Middle East developments remain the main near-term risks to inflation and external stability.
Sources & reporting notes
This is a summary of published reporting, not independent reporting. Details are as carried by the cited source, which was reviewed on 29 July 2026.
- Dawn — "Central bank keeps interest rate unchanged at 11.5pc"28 July 2026 · The SBP's rate decision, its inflation and growth projections, the external and fiscal outlook, and business reaction.
