Karachi: The State Bank of Pakistan (SBP) on Monday increased its benchmark policy rate by 100 basis points to 11.50%, marking its first rate hike in nearly three years, as it moved to counter mounting inflationary pressures and growing global uncertainty.
The decision was taken during the central bank’s third Monetary Policy Committee (MPC) meeting of 2026. The move broadly aligned with market expectations, which had priced in a tightening stance amid rising energy prices and heightened geopolitical tensions, particularly in the Middle East.
In its post-meeting statement, the MPC highlighted that the prolonged conflict in the region has elevated risks to Pakistan’s macroeconomic outlook. Global energy prices, freight costs, and insurance premiums have remained significantly higher than pre-conflict levels, while supply chain disruptions have added to uncertainty.
“While incoming data has remained broadly in line with expectations, the impact of these global developments is likely to become more visible in the coming months,” the committee noted. It added that inflation is expected to rise and stay above the target range in the near term, prompting the need for a tighter monetary policy stance.
The central bank emphasised that the rate hike is aimed at anchoring inflation expectations and limiting the second-round effects of external supply shocks, which could otherwise feed into broader price increases.
Recent economic indicators also influenced the MPC’s decision. Headline inflation rose to 7.3% in March, while core inflation edged up to 7.8%. Surveys showed a deterioration in consumer and business confidence, alongside rising inflation expectations.
At the same time, the economy has shown signs of recovery. Real GDP grew by 3.8% in the first half of FY26, compared to 1.9% during the same period last year. The current account posted a small surplus between July and March, while the SBP’s foreign exchange reserves stood at approximately $15.8 billion as of April 24, supported in part by Pakistan’s return to international capital markets through Eurobond issuance after a gap of over four years.
The MPC also noted that a staff-level agreement had been reached with the International Monetary Fund on March 27, 2026, which is expected to support macroeconomic stability going forward.
Reaffirming its commitment to price stability, the central bank stressed the importance of maintaining fiscal discipline and continuing efforts to build external buffers. It also underscored the need for structural reforms to strengthen the external account and ensure sustainable economic growth in an increasingly volatile global environment.
Samra Zulfiqar, a real estate analyst at Zameen.com, is passionate about finding projects that offer buyers the best returns. Her keen insights spotlight the market’s most promising opportunities.
