Pakistan ready to hike rates if inflation bites, IMF says

March 28, 2026 (MLN): Pakistan’s central bank stands prepared to raise interest rates if inflation pressures intensify, the International Monetary Fund said.

This indicates the need for a tight, data-dependent monetary policy as the country navigates external risks and volatile global prices.

In its latest assessment following staff-level talks, the IMF signaled support for the State Bank of Pakistan’s current stance, emphasizing that keeping inflation within the target range remains the top priority.

The lender warned that renewed spikes in global food and energy prices, particularly amid ongoing geopolitical tensions, could fuel price pressures and unanchored inflation expectations.

“Monetary policy should remain appropriately tight and responsive to data,” the IMF noted, adding that the central bank must remain ready to act decisively if needed.

The Fund also stressed the importance of exchange rate flexibility, describing it as a key shock absorber for Pakistan’s economy.

A market-determined currency, it said, will help cushion the impact of external shocks, including spillovers from Middle East tensions and global financial tightening.

At the same time, the IMF highlighted the need for the banking system to remain resilient, ensuring it can continue to support import financing and external payments even under pressure on the balance of payments.

The remarks came as Pakistan’s economy shows signs of stabilization, with inflation easing and external buffers improving in recent months.

However, the IMF cautioned that risks remain tilted to the downside, particularly from volatile commodity prices and uncertain global conditions.

The central bank’s policy path will therefore remain closely tied to incoming data, with policymakers balancing the need to anchor inflation expectations while sustaining the fragile economic recovery.

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