ISLAMABAD: Pakistan’s Finance Minister Muhammad Aurangzeb on Wednesday said that there was room for the State Bank of Pakistan to lower its key policy rate by the end of the year, citing easing inflation and improved economic indicators.
Addressing a ceremony in Islamabad, he said after reducing the interest rate by 1,000bps from 22% since June 2024, the State Bank of Pakistan (SBP) has kept it at 11% since May.
“The monetary policy rate and the market-based exchange rate are very much the purview of the State Bank of Pakistan and the Monetary Policy Committee,” he said.
“Having said that, in my personal opinion, I do think there is room to do more in terms of policy rate, and I am very hopeful that during the course of this calendar year, we will see movement on the policy rate going south,” the minister added.
He noted that “whether it was average inflation or core inflation”, there was space for the SBP to lower the rate.
Strong progress on the economic front
Finance Minister, expressing his views, said the government has made strong progress on the economic front during the last one and a half years.
Highlighting the improvement in the local business environment, he said the small and medium enterprises’ debts have increased by 41% and the figure of agricultural debts has crossed PKR 2.5 trillion.
He said a 38% increase in the private sector debts has also been witnessed.
Finance Minister Muhammad Aurangzeb highlighted several key economic developments, noting increased investor interest in the Pakistan Stock Exchange, with 65,000 new investors joining over the past year.
He stated that company registrations have reached 250,000 annually, reflecting growing business activity.
The Finance Minister also emphasised that major structural reforms are underway, including the launch of tariff reforms—introduced for the first time in the country’s history.
Aurangzeb revealed that the government managed to reduce its debt servicing cost by PKR 1 trillion last year. Additionally, a rightsising initiative is in progress, targeting 43 ministries and 400 departments to improve efficiency.
He noted the implementation of a contributory pension model and affirmed that the privatisation of public institutions will gain momentum this year.
The Finance Minister also announced plans to introduce Panda Bonds by the end of the year, aiming to diversify funding sources.
Highlighting global recognition of Pakistan’s economic reforms, Finance Minister Muhammad Aurangzeb noted that both Fitch and S&P Global Ratings have upgraded the country’s credit ratings this year.
Speaking on the recent trade deal reached with the United States, wherein the tariffs were reduced from 29% to 19%, the finance minister hailed the “regionally competitive tariff”.
