State Bank of Pakistan Maintains Tight Monetary Policy Amid Inflation Concerns

KARACHI: The State Bank of Pakistan (SBP) is expected to uphold its tight monetary policy as financial experts warn that the central bank is unlikely to achieve its mid-term inflation target of 5-7 percent for FY27. This comes as the global economy continues to face volatile oil prices, exacerbating inflationary pressures within the country.

Recent data reveals that the Consumer Price Index-based inflation reached 10.3 percent in September, indicating that both businesses and consumers will continue to feel the strain of rising costs. Analysts suggest that the SBP will refrain from reducing interest rates to spur economic activity, opting instead to maintain a restrictive stance to foster what it deems ‘sustainable’ growth.

For the past four years, the government and the SBP have settled for a low growth rate of approximately 3 to 3.7 percent, a figure that fails to create jobs or alleviate the plight of the 44 percent of Pakistanis living in poverty. Amir Aziz, a manufacturer, emphasized the dire need for a comprehensive economic policy to stimulate domestic investment, which is currently hindered by soaring energy prices and persistent double-digit inflation.

Looking ahead, analysts anticipate that without significant policy changes, the economic landscape will remain bleak. The SBP’s next monetary policy meeting will be closely watched for any indications of a shift in strategy, as stakeholders await measures that could potentially revitalize investment and economic growth.