In a major policy reversal, the State Bank of Pakistan (SBP) has opted to keep the benchmark interest rate at 12%, the first time in near-on-year monetary tightening that rate hikes have been halted. The move has come at a time when the nation is going through economic difficulties, inflationary pressures, and financial market stabilization.
The move by the central bank is a careful one, reconciling inflation management and economic growth. Pakistan’s economy has confronted increasing prices, depreciation of currency, and external debt issues over the last year, leading to a string of rate increases. But with moderation of inflation and fiscal consolidation, the SBP has chosen stability in its recent policy statement.
Analysts note that sustaining the rate would assist firms and investors in regaining confidence, especially in sectors hit by high borrowing costs. Ongoing despite this break, SBP has underscored that it is still watchful and will continue to fine-tune policy if inflationary pressures return.
The move also fits into Pakistan’s overall strategy to attract foreign investments, enhance fiscal prudence, and arrange debt rescheduling. With changing global and domestic conditions, economists would be keenly observing if this lull marks the start of a monetary easing phase or a temporary halt in Pakistan’s economic recovery plan.
