Key points
- Governor Jameel cites rising energy costs and base effect for cautious stance
- Exports grew by 4pc and remittances surged by $8 billion, helping boost reserves and maintain current account surplus
ISLAMABAD: The State Bank of Pakistan (SBP) on Wednesday held its key policy interest rate steady at 11 per cent amid easing inflation and calls to stimulate economic growth.
The decision was unveiled by SBP Governor Jameel Ahmed during a press briefing following the latest Monetary Policy Committee (MPC) meeting. The governor acknowledged that inflation had cooled to its lowest in April, but noted a slight rebound in May and June—mainly fueled by rising energy prices and what he termed the “base effect,” which makes year-on-year inflation look higher due to unusually low numbers last year.
“We must tread carefully,” Governor Jameel stated. “Energy prices remain volatile, and we anticipate moderate inflationary pressure in the months ahead.”
Walking a fine line
While the rate freeze surprised some, others saw it as a sign of the central bank’s intent to maintain macroeconomic stability, even at the cost of short-term stimulus. The SBP is clearly walking a fine line—balancing the need to control inflation without choking off momentum in the real economy.
On the external front, there was reason for optimism. Governor Jameel reported that exports have grown by four per cent, a welcome trend for a country heavily reliant on foreign trade. “Sustainable export growth is crucial to keeping our current account stable,” he emphasized.
A major bright spot in the economic landscape came in the form of worker remittances, which surged by $8 billion, providing a strong cushion for the current account and helping the country stay in surplus.
Economic engine holding firm
Despite massive external obligations, Pakistan’s economic engine seems to be holding firm. Foreign exchange reserves rose by $5 billion, even after the country made a staggering $26 billion in external payments. Governor Jameel proudly confirmed that all debt obligations had been met on time, a critical signal to international lenders and credit agencies.
For now, however, the SBP appears committed to a path of measured caution, prioritizing financial stability over rapid-fire stimulus—and in today’s turbulent economic times, that might just be the steady hand the country needs.
