State Bank of Pakistan Releases Semiannual Monetary Policy Report
According to sources, the report reviews economic developments since the previous Monetary Policy Report (MPR) published in August 2025 and outlines the factors that guided the decisions of the Monetary Policy Committee (MPC) during this period.
The State Bank expects inflation to remain within the target range of 5 to 7 percent for most of fiscal years 2026 and 2027. The central bank has projected the current account deficit to remain in the range of 0 to 1 percent of GDP in FY2026, while foreign exchange reserves are expected to reach $18 billion by June 2026 and further increase in FY2027, covering nearly three months of imports.
The report also notes that economic activity has strengthened, supported by ongoing macroeconomic stability, eased financial conditions, and the recent reduction in cash reserve requirements (5 percent). Based on these developments, the State Bank has estimated real GDP growth for FY2026 in the range of 3.75 to 4.75 percent, with expectations of faster growth in FY2027.
However, the Semiannual Monetary Policy Report (MPR) highlights some risks to the economic outlook. While concerns over disruptions from recent floods have eased, global tariff changes and volatility in international commodity prices continue to create uncertainty. Domestically, lower-than-target revenue collection and potential adverse environmental impacts are identified as significant vulnerabilities for inflation, the external account, and economic growth.
The central bank emphasized the need to accelerate structural reforms to strengthen economic resilience, increase productivity, and address persistent losses in public sector entities.
The report also includes four thematic boxes focused on key monetary policy concepts, covering the effects of higher interest rates after June 2024, the use of heat maps to assess economic activity, and the role of surveys and structured engagement with private sector stakeholders to enhance data-driven policymaking.
