State Bank of Pakistan raises interest rate to 12%

The State Bank of Pakistan (SBP) has increased its benchmark interest rate by 50 basis points, raising it from 11.5% to 12%. The decision was supported by nine of the ten members of the Monetary Policy Committee.

Governor Jameel Ahmad cited escalating geopolitical tensions in the Middle East, rising international oil and commodity prices, and domestic wheat supply disruptions as primary drivers for the hike to manage the inflation outlook. Addressing concerns regarding export competitiveness, the Governor stated that export stagnation is not linked to interest rates, pointing to the Export Refinance Scheme which offers concessional financing at 4.5%. The financing limit for this scheme has been increased from Rs1 trillion to Rs1.5 trillion.

The SBP also revised its economic forecasts, raising the annual workers’ remittances projection to $45 billion from $44 billion. Economic growth for the current fiscal year is projected to be between 3.75% and 4.75%. Additionally, the central bank aims to build foreign exchange reserves to $23 billion by the end of the year and $25 billion by June 2027.