The State Bank of Pakistan on Wednesday decided to keep key interest rates unchanged, dashing hopes of traders who were expecting a rate reduction.

The decision was announced by SBP Governor Jameel Ahmed while addressing a press conference in Karachi.

Jameel Ahmed, who earlier attended a key monetary policy meeting, announced an improvement in all major economic indicators and said that there are clear signs of stability and improvement in Pakistan’s economy during the current fiscal year.

According to him, all decisions have been taken after a thorough economic analysis, which includes inflation, remittances, exports, foreign exchange reserves and growth rate indicators.

According to Jameel Ahmed, the current inflation rate in the country stands at 7.2 per cent. However, there was a noticeable increase in inflation during the months of May and June.

He said that the upward trend in inflation began in April, which could persist for some time.

The inflation rate may exceed 7 per cent in the coming months, he said, adding that the overall inflation rate is expected to remain between 5 and 7 per cent during the current fiscal year.

The SBP governor said that remittances exceeded about $38 billion in the last fiscal year, while in the current fiscal year, remittances are expected to surpass $40 billion.

Maintaining control over the exchange rate has led to hike in remittances by $8 billion.

The governor said that foreign exchange reserves also increased by about $5 billion. Exports rose by 4 per cent compared to the previous fiscal year.

The overall current account has reached the highest surplus level in 14 years, which is a positive development.

Jameel Ahmed further said that during the last fiscal year, Pakistan made all its international payments amounting to 25.9 billion on time.

The country’s imports and other foreign exchange requirements were also met on time.

Regarding the growth rate, Jameel Ahmed said that the GDP growth rate for the fiscal year 2025 was 2.7 per cent, while growth in the agricultural sector was limited to 0.6 per cent.

However, the overall growth rate will improve due to the improved agricultural sector performance in the current fiscal year, and is expected to range between 3.25 and 4.25 per cent.

The SBP governor said that special attention was given to the external accounts to stabilise the economy, which has yielded positive results.

He was confident that with current fiscal discipline, increased exports, and a stable flow of remittances, the country’s economy would continue to strengthen in the coming months.

Demand for rate cut

A significant decline in the inflation graph and positive financial trends had raised the key question of whether the policy rate would be reduced or the State Bank would maintain the interest rate at 11 per cent.

According to statistics, the inflation rate in Pakistan has reached its lowest level in the last 60 years, with inflation recorded at 3.03 per cent in April.

In this context, a decline has also been observed in profits on national savings schemes and government T-bill auctions.

These indications suggested that a reduction in interest rates might be possible. However, this did not happen.

Finance Minister Muhammad Aurangzeb has also supported a reduction in interest rates, saying that high rates were affecting businesses and pushing the economy towards stagnation.

Traders and industrialists have also been demanding that interest rates be brought down to single digits.

They maintain that interest rates in Pakistan are unnecessarily high compared to other countries in the region, which is hindering investment and business activities.

A recent survey indicated that 56 per cent of experts expected interest rates to decrease by 50 to 100 basis points, while 37 per cent expected no change.

Pakistan’s current key interest rate stands at 11 per cent. Economic experts estimate that inflation will range between 5 and 7 per cent during the current fiscal year, while in July it could decrease to between 3 and 3.5 per cent.