Future policy rate cuts by the State Bank of Pakistan (SBP) will depend on the economic fallout from recent floods and the outcome of the ongoing International Monetary Fund (IMF) review, SBP Governor Jameel Ahmad said in an interview with Bloomberg.
The central bank chief’s remarks come as Pakistan faces renewed inflation risks and awaits the IMF’s assessment under its $7 billion Extended Fund Facility (EFF).
Ahmad noted that inflation could “temporarily exceed the upper bound of the 5%-7% medium-term target range in early 2026,” but is expected to stay within target on average during the current and next fiscal years.
The Monetary Policy Committee (MPC) is scheduled to meet on October 27, following its previous decision to keep the policy rate unchanged at 11%, citing the macroeconomic uncertainty created by monsoon floods. The floods have caused billions of dollars in losses, threatening higher inflation, fiscal stress, and external account pressures.
The governor stressed that the SBP’s tight monetary stance has played a key role in curbing inflation.
“The policy rate is positive — substantially positive — and this type of tight stance has contributed in controlling the inflation,” he said, adding that fiscal and monetary coordination is showing “good progress.”
On Pakistan’s IMF program, Ahmad said the arrangement is “progressing well,” with the SBP exceeding its foreign reserves targets. Over the past three years, the central bank has reportedly purchased about $20 billion from the interbank market — reversing its earlier position as a net seller — to build reserves.
“If we had not done that, our situation would have been quite different,” Ahmad said, adding that the same strategy helped absorb the impact of the recent $500 million Eurobond payment without denting reserves.
The governor also expressed optimism about Pakistan’s trade outlook, citing growing interest from U.S. importers following the Pakistan-U.S. tariff deal, which secured a 19% tariff rate on textile exports.
On digital finance, Ahmad confirmed that Pakistan is moving to legalise cryptocurrency trading under a strict regulatory framework designed to prevent risks to the financial system.
“This is a strategic move from the government side, and soon I think new players will come in,” he said. “We have ensured that it should not pose any risks from the central bank’s perspective.”
The SBP’s balanced tone signals a cautious approach ahead of the IMF review, with policy flexibility tied closely to post-flood recovery, inflation trends, and progress on structural reforms.
