Karachi: The Karachi Interbank Offered Rate (KIBOR) saw a widespread decline across all tenors on Tuesday, following the State Bank of Pakistan’s (SBP) decision to cut its benchmark interest rate by 100 basis points.
The SBP’s Monetary Policy Committee (MPC) announced the policy rate reduction on Monday, bringing it down from 12% to 11%, a move that exceeded market expectations. The rate cut was attributed to a sharper-than-anticipated drop in inflation, particularly in food prices and electricity tariffs, as well as improved macroeconomic indicators.
Reacting to the policy decision, the KIBOR—which represents the average lending rate at which banks offer funds to one another—declined significantly across various short- and medium-term tenors, according to data provided by Arif Habib Limited.
The one-week KIBOR dropped by 91 basis points to 11.43%
Two-week KIBOR declined by 87bps to 11.44%
One-month KIBOR fell by 77bps to 11.47%
Three-month KIBOR decreased by 75bps to 11.33%
Six-month KIBOR was down 64bps to 11.44%
Nine-month KIBOR slid 73bps to 11.53%
One-year KIBOR declined 75bps to 11.51%
In its post-policy statement, the SBP noted a “further improvement” in the inflation outlook, citing favorable base effects, moderate domestic demand, and continued disinflationary trends. Core inflation also eased in April, reinforcing expectations for a shift in monetary policy stance.
However, the central bank also highlighted global uncertainties, particularly around trade tariffs and geopolitical developments, as potential risks to the economic outlook. It stressed the need for a “measured” approach to future rate decisions.
SBP Governor Jameel Ahmad, in a briefing following the MPC meeting, stated that key economic indicators were showing signs of recovery and that the external sector’s position was gradually stabilizing. He acknowledged recent volatility in foreign exchange reserves due to debt repayments but emphasized year-on-year improvement.
Market participants now await further clarity on inflation trends and external risks, which could shape future monetary policy decisions. The KIBOR decline is expected to lower borrowing costs for businesses and signal potential easing in credit conditions in the near term.
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.
