KARACHI; The State Bank of Pakistan (SBP) on Monday decided to maintain the policy rate at 11 percent, keeping it unchanged for the fifth consecutive month.
The central bank’s decision comes despite persistent calls from the business and industrial sectors for a significant rate cut to boost economic activity.
Analysts and researchers had largely anticipated the SBP to maintain the existing rate, citing recent floods in Khyber Pakhtunkhwa and Punjab that severely damaged crops and infrastructure, along with renewed inflationary pressures, as key factors influencing the decision.
According to official data, the Sensitive Price Index (SPI) rose by 5 percent during the week ending October 23, primarily driven by higher food prices. Analysts said the increase reflected flood-related disruptions in food supplies and warned that the impact could extend to the Consumer Price Index (CPI) in the months ahead.
Concerns over rising inflation have led the central bank to avoid reducing the policy rate despite sluggish economic growth and a widening gap between inflation and the real interest rate.
SBP data also indicates weak private-sector borrowing, as businesses remain hesitant to take on new loans even after the first quarter of the current fiscal year. Pakistan’s economic growth has remained stagnant for the past three years, adding to social and fiscal pressures, with nearly 97 million people estimated to be living below the poverty line.
The government continues to face challenges in reviving growth and attracting investment, particularly in manufacturing and agriculture. Industry leaders argue that high borrowing costs and heavy taxation have eroded competitiveness, further dampening prospects for economic recovery.
