Pakistan’s Monetary Policy Committee (MPC) announced the Interest Rate Cut on 15th December, and said the global economic environment remains challenging, particularly for exports, but noted sufficient room to reduce the policy rate to support sustainable growth while maintaining price stability.
The committee highlighted improvements since its last meeting, including higher foreign exchange reserves, sizeable debt repayments, improved consumer confidence, and continued momentum in large-scale manufacturing. Sales of automobiles, fertilizer, cement, and rising machinery imports signal a positive industrial outlook, though weak exports; especially rice, remain a concern.
SBP Interest Rate Cut and Economic Outlook
📢 Monetary Policy Committee has decided to decrease the policy rate by 50 basis points to 10.5 percent w.e.f. December 16, 2025.#SBPMonetaryPolicy
— SBP (@StateBank_Pak) December 15, 2025
The MPC expects real GDP growth for FY26 to remain in the upper range of 3.25–4.25pc, supported by agriculture, services, and improving industrial activity. Wheat production is also expected to exceed targets due to better input conditions and government incentives.
The current account recorded a $0.7bn deficit between July and October FY26, in line with expectations. While imports rose with economic activity, remittances stayed strong. SBP’s foreign exchange reserves have already crossed the December 2025 target of $15.5bn and are projected to reach $17.8bn by June 2026.
Inflation has stayed within the target range, supported by prudent monetary policy and fiscal discipline, though risks remain from global commodity prices, energy costs, and food price volatility.
Prime Minister Shahbaz Sharif welcomed the Interest rate cut, calling it a positive step for businesses and the public. Market analysts also termed the move supportive for economic activity, equities, and domestic demand, though some cautioned that the impact of a 50bps cut alone would be limited.
