IMF stresses tight monetary policy

March 26, 2025 (MLN): The International Monetary Fund (IMF) has emphasized the need for Pakistan to maintain an appropriately tight monetary policy, recognizing that the full impact of recent interest rate cuts is yet to materialize.

In a press statement issued today, the authorities pledged to follow a data-driven approach to ensure inflation remains anchored within the State Bank of Pakistan’s (SBP) medium-term target range of 5% -7%.

As part of its priority policy framework, the IMF has also underscored the importance of preserving a fully functioning foreign exchange market.

The authorities remain committed to exchange rate flexibility while continuing efforts to rebuild the country's foreign exchange reserve buffers.

In its last meeting on March 10, 2025, the Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) kept the policy rate unchanged at 12%, effective March 11, 2025, in contrast with market expectations.

In January 2025, the SBP reduced the policy rate by 100 basis points to 12%. The reduction was the sixth in a row, bringing the total decrease since June 2024 to 1,000bps as a slowdown in inflation gave policymakers room to continue monetary easing in a bid to spur growth.

Today, the IMF and the Pakistani authorities have reached a staff-level agreement on the first review under Pakistan’s Extended Fund Facility (EFF) and a new arrangement under the Resilience and Sustainability Facility (RSF).

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