Interest rate cut unlikely, S&P Global issues new report on Pakistan’s economy

Global financial institution S&P Global Market Intelligence has said in its latest review report on Pakistan’s economy that despite the improvement in economic indicators, the State Bank of Pakistan may maintain a cautious monetary policy in the coming months, as inflation, uncertainty in the Middle East and climate change continue to be major risks to the economy.

According to the report, the State Bank maintained the policy rate at 11.5 percent in the recent monetary policy meeting, which shows that the central bank is currently prioritizing economic stability and following a strategy to control inflation.

S&P Global says that although several key economic indicators in Pakistan are moving in a positive direction, inflation is still higher than the central bank’s target, due to which the chances of an immediate and significant reduction in interest rates appear limited.

The report forecasts Pakistan’s economic growth rate to be 3.5 percent during the fiscal year 2026-27. According to the agency, the economy can gradually move towards stability thanks to economic reforms, fiscal discipline and improvements in the external sector.

S&P Global has also estimated that Pakistan’s foreign exchange reserves could reach $19.5 billion by December 2026. According to the report, the current account deficit is expected to remain limited due to strong remittances from overseas Pakistanis and improvement in external accounts, which may further reduce external financial pressures.

Ahmed Mobin, Principal Economist at S&P Global, said that timely repayment of debts and maintaining fiscal discipline will be of utmost importance for Pakistan. According to him, although signs of stabilization are becoming visible in the economy, inflation is still a major challenge, due to which an immediate change in the central bank’s cautious approach is unlikely.

He warned that the resurgence of tensions in the Middle East, volatility in global oil and other commodity prices, and the growing impact of climate change could weigh on Pakistan’s economic performance in the coming months.

According to economists, if inflation continues to decline, foreign exchange reserves continue to increase, and the external sector remains stable, new possibilities may arise regarding interest rates in the upcoming monetary policy meetings. However, in the current circumstances, the central bank’s cautious approach is being considered a more viable strategy.