Pakistan’s central bank rules out 'sudden and higher' interest rate changes in foreseeable future

This undated file photo shows premises of the State Bank of Pakistan. (Shutterstock)
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Updated 02 March 2021
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Pakistan’s central bank rules out 'sudden and higher' interest rate changes in foreseeable future

  • The State Bank of Pakistan has given forward guidance on monetary policy for the first time to address concerns of investors
  • The central bank maintains policy rate at 7 percent for the next two months as domestic recovery gains traction

KARACHI: Pakistan’s central bank on Friday ruled out any “sudden and higher” interest rate movements in the foreseeable future amid speculations that the International Monetary Fund (IMF) was likely to resume its $6 billion loan program for the country. 

The bank decided to maintain the policy rate at 7 percent for the next two months, saying that domestic economic recovery had gained further traction. 

“In the absence of unforeseen developments, the Monetary Policy Committee (MPC) expects monetary policy settings to remain unchanged in the near term,” Governor State Bank of Pakistan (SBP) Dr Reza Baqir told a news conference in Karachi. 

“As the recovery becomes more durable and the economy returns to full capacity, the MPC expects any adjustments in the policy rate to be ‘measured and gradual’ to achieve mildly positive real interest rates,” he said while reading a document, adding that the MPC considered it appropriate to provide some forward guidance on monetary policy to facilitate policy predictability and decision-making by economic agents. 

Last week, Baqir said the country was hoping for good news following talks with the IMF on the revival of fiscal stabilization program where concerns about future interest rates were also raised. The central bank’s forward guidance is meant to assuage such concerns of investors and business community. 

Pakistan signed $6 billion, three-year Extended Fund Facility (EFF) with the IMF and has so far secured $1.44 billion under the loan program since July 2019. The country was expecting another tranche of about $450 million before the second review was put on hold about a year ago. 

“We were in touch with the IMF at the technical level and the IMF also wanted fast economic recovery,” the SBP governor said, adding: “Now talks are going on with the IMF and when announcement would be made that our agreement on the review has been done its basic purpose would be to maintain the economic growth so that recovery could be stabilized.” 

Despite recent electricity tariff hikes, the central bank said that inflation was expected to fall within the previously announced range of 7-9 percent during FY21, hoping that the trend would move toward the 5-7 percent target range over the medium-term. 

Pakistan on Thursday increased the electricity tariff by Rs1.95 per unit, or 15 percent, which will also affect the base tariff for lifeline consumers using up to 50 units per month for the first time in almost two decades.

The SBP governor said, however, that the impact of these measures on inflation would be temporary. 

“The rates have been increased in the past as well,” he added, “but we witnessed that their impact was temporary.” 

He said the country had come out of the difficult stabilization phase and the economic activity data and indicators of consumer and business sentiment were reflecting continued improvement. 

However, the MPC stressed in its report that considerable uncertainty remained part of the general economic outlook. 

“The trajectory of the COVID pandemic is difficult to predict, given still-elevated global cases, the emergence of new strains, and lingering uncertainties about the roll out of vaccines worldwide,” the SBP statement read. “Such external shocks could slow the recovery.” 


Trump hosts Pakistan army chief for unprecedented lunch, confirms Iran discussed

Updated 6 sec ago
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Trump hosts Pakistan army chief for unprecedented lunch, confirms Iran discussed

  • This was the first time in years that a Pakistani army chief was hosted by a sitting US president at the White House
  • Munir was widely expected to press President Trump not to enter Israel’s war with Iran and to seek a ceasefire

ISLAMABAD: US President Donald Trump on Wednesday hosted Pakistan’s army chief for lunch in an unprecedented White House meeting, after which he told reporters he was “honored” to meet Field Marshal General Asim Munir and that the two had discussed the ongoing Iran-Israel crisis.

This was the first time in many years that a Pakistani army chief was hosted by a sitting US president at the White House, highlighting Washington’s renewed interest in maintaining influence in South Asia as regional tensions flare.

After the schedule for the lunch was announced this week, Pakistani media widely speculated that Munir would press Trump not to enter Israel’s war with Iran and to seek a ceasefire. A section of Pakistan’s embassy in Washington represents Iran’s interests in the United States as Tehran does not have diplomatic relations with the US.

Munir’s White House meeting during the ongoing Mideast conflict has also fueled speculation in Islamabad that Washington could push Pakistan to align more openly with the US position, which has historically been supportive of Israel. Such pressure could complicate Pakistan’s delicate balancing act in the Middle East, where it maintains close ties with Iran and other Gulf partners and sympathizes with the Palestinian cause but seeks to avoid getting dragged into regional rivalries that could inflame tensions at home.

“Well, they [Pakistan] know Iran very well, better than most, and they’re not happy about anything [Iran-Israel conflict],” Trump said in response to a question by a reporter after his meeting with Munir on whether Iran came up in the discussion.

“It’s not that they’re better with Israel. They [Pakistan] know them both actually, but they probably, maybe, know Iran better, but they [Pakistan] see what’s going on. And he [Field Marshal General Asim Munir] agreed with me.”

Trump did not specify what the Pakistani general had agreed with him on, and went on to talk about last month’s military conflict between India and Pakistan that the US president has publicly claimed credit for ending with a ceasefire.

Nuclear-armed neighbors India and Pakistan engaged in their fiercest military conflict in decades between May 7-10, exchanging drones, missiles and artillery for nearly four days before Trump announced he had brokered a truce.

“The reason I had him [Munir] here, I wanted to thank him for not going into the war [with India], just, you know, ending the war,” Trump said, also giving credit to Indian Prime Minister Narendra Modi. “So, I was honored to meet him [Munir] today.”

Tensions between Israel and Iran have spiked sharply since last Friday when Israeli forces struck multiple targets including Iranian nuclear sites and senior officials. Iran retaliated with attacks on Israeli territory, raising fears of a wider Middle East war that could threaten global energy supplies and regional stability.

Pakistan, which shares a long border with Iran and maintains historic ties with Tehran, has repeatedly called for de-escalation and a ceasefire in the region. Defense Minister Khawaja Asif told Pakistan’s Geo TV that Munir’s White House visit would give the army chief a chance to share Pakistan’s perspective on the conflict and push Washington to help prevent further escalation.

Pakistan’s military plays a key role in shaping the country’s foreign policy, and Munir’s high-profile White House invitation is being seen as part of Washington’s broader effort to recalibrate ties with Islamabad, a vital but often difficult ally for the US in South Asia.

Local media in Pakistan reported that Munir’s visit had been arranged weeks in advance. Analysts say the rare top-level contact underscores how the US wants to maintain strategic leverage in a region shaped by the rivalries of three nuclear powers — China, India and Pakistan — and rising instability in the Middle East.


Pakistan secures $1 billion in ADB-backed financing from Middle Eastern banks

Updated 18 June 2025
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Pakistan secures $1 billion in ADB-backed financing from Middle Eastern banks

  • The loan aims to strengthen the country’s fiscal resilience, support reform momentum
  • The government says the deal signals renewed trust in Pakistan’s economic trajectory

KARACHI: Pakistan has signed a $1 billion syndicated term finance facility backed by Middle Eastern banks, marking its return to the region’s financial markets after more than two years, the finance ministry said on Wednesday.
The five-year facility is partially guaranteed by the Asian Development Bank (ADB) under its Policy-Based Guarantee program, which is linked to fiscal reforms undertaken by Pakistan to improve resource mobilization and economic stability.
The financing by the Middle Eastern banks is structured across Islamic and conventional tranches, with 89 percent of the total amount raised through a Shariah-compliant facility.
“This is a landmark transaction for the Government of Pakistan that demonstrates strong support from leading financiers in the region,” the finance ministry said in a statement.
It informed that Dubai Islamic Bank acted as the sole Islamic global coordinator, while Standard Chartered Bank served as mandated lead arranger and bookrunner.
Other financiers include Abu Dhabi Islamic Bank as mandated lead arranger, and Sharjah Islamic Bank, Ajman Bank and Pakistan’s Habib Bank Limited (HBL) as arrangers.
The deal marks the first time a facility has been backed by an ADB Policy-Based Guarantee linked to specific reform measures undertaken by a member country.
According to the ministry, the ADB’s support helped Pakistan attract significant interest from regional lenders and re-enter global capital markets at a critical time for the economy.
The government said the success of the transaction signals renewed trust in Pakistan’s fiscal outlook and macroeconomic trajectory, marking the beginning of a new partnership with Middle Eastern banks.
Pakistan, which has faced persistent external financing gaps in recent years, has relied on friendly nations and global lenders to stabilize its balance of payments and rebuild investor confidence.
The ADB-backed facility is intended to help strengthen fiscal resilience while supporting economic reform momentum.


Pakistan reports first Congo virus death of 2025 in Karachi

Updated 18 June 2025
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Pakistan reports first Congo virus death of 2025 in Karachi

  • Virus is transmitted through tick bites or direct contact with blood of infected animals
  • Pakistan’s southwestern province of Balochistan reported 23 Congo virus cases in 2024

KARACHI: A 42-year-old man lost his life after contracting the Crimean-Congo Hemorrhagic Fever (CCHF), marking the first confirmed fatality from the virus in Pakistan’s southern Sindh province this year, the health department said on Wednesday.

The fatality rate for the Congo virus ranges from 10 percent to 40 percent, depending on the quality of health care, timeliness of treatment and the patient’s overall health, according to the World Health Organization.

The virus, which is endemic in parts of Africa, Europe and Asia, is primarily transmitted through tick bites or contact with the blood or tissues of infected animals.

“First case of Congo virus [has been] reported in Sindh,” the Sindh Health Department said in a statement on Wednesday.

“42-year-old male was a resident of District Malir,” it continued. “The test report came out positive on June 16 and the patient passed away on June 17.”

Pakistan’s southwestern Balochistan province reported 23 Congo virus cases in 2024, with five deaths since January last year.

Local medical practitioners said most cases were diagnosed during the summer, when the likelihood of the virus spreading increases, particularly around the Eid Al-Adha festival.

The Islamic holiday, marked by the mass slaughter of animals, typically leads to greater human-animal interaction and exposure to infected livestock.

Pakistan witnessed its first case of Congo virus in 1976 and remained a major victim for years, according to the National Library of Medicine.

The country faces major challenges in combating Congo virus every year due to its specific geographical position and a majority of the population being involved with animal husbandry, it added.

There is no approved vaccine for its prevention.

The European Medicines Agency in May 2024 approved a Phase I clinical trial in Sweden for a DNA-based vaccine candidate, N-pVAX1, targeting the Congo virus.

Separately, the University of Oxford in August 2023 launched a Phase I trial of its ChAdOx2 CCHF vaccine, based on the Oxford/AstraZeneca Covid-19 platform, to assess safety and immune response.


Pakistan rescues injured Indian sailor amid post-war tensions with New Delhi

Updated 18 June 2025
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Pakistan rescues injured Indian sailor amid post-war tensions with New Delhi

  • Pakistan evacuates the injured sailor from a Liberian-flagged tanker with an all-Indian crew
  • Rare humanitarian gesture follows recent Pakistan-India war amid strained diplomatic ties

ISLAMABAD: Pakistan on Wednesday evacuated an injured Indian sailor from an oil tanker in the Arabian Sea, in a rare humanitarian gesture weeks after the two countries fought a brief four-day war that further strained already tense relations.

The medical evacuation was coordinated by the Pakistan Navy’s Joint Maritime Information and Coordination Center (JMICC), which received a distress call from the Liberian-flagged oil and chemical tanker MT HIGH LEADER, carrying an all-Indian crew.

The Pakistan Maritime Security Agency (PMSA) deployed a vessel and transferred the injured crew member to a hospital in Karachi for emergency treatment.

“The successful medical evacuation is yet another testament to the operational readiness and responsiveness of Pakistan’s maritime safety apparatus,” the Pakistan Navy said in a statement.

“The swift execution reflects Pakistan Navy’s resolve to fulfill its international obligations for the safety of life at sea, irrespective of the nationality of the seafarers involved,” it added.

The incident comes at a time of high diplomatic friction between the two nuclear-armed neighbors.

Last month’s military confrontation, involving missile, drone and artillery exchanges, marked one of the most serious escalations in recent years.

Pakistan has repeatedly called for the revival of a composite dialogue process to resolve long-standing issues, including the Kashmir dispute, cross-border militancy and a water-sharing arrangement under the Indus Waters Treaty.

India, however, has resisted any engagement so far.

The JMICC, which coordinated the evacuation, serves as Pakistan’s central maritime emergency response hub and regularly liaises with both national and international stakeholders.


Pakistan reduces sales tax on imported solar panels from 18 % to 10 % amid parliamentary pushback

Updated 18 June 2025
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Pakistan reduces sales tax on imported solar panels from 18 % to 10 % amid parliamentary pushback

  • The government proposed 18% GST on imported solar panels during budget 2025-26
  • Pakistan imported 17 gigawatts of solar panels in 2024, twice the previous year’s volume

ISLAMABAD: Pakistan’s Deputy Prime Minister Ishaq Dar on Wednesday said the general sales tax (GST) on imported solar panels had been reduced from 18% to 10% for the current year, following concerns raised by a parliamentary finance body.

The Senate Standing Committee on Finance and Revenue had urged the government a day earlier to withdraw the proposed 18% GST on imported solar panels, noting that some stakeholders had begun stockpiling equipment ahead of the federal budget to avoid the new levy.

The country’s proposed federal budget for the 2025-26 fiscal year included an 18% GST on the import and local supply of solar panels and related equipment, prompting concern from industry stakeholders and clean energy advocates.

Pakistan imported 17 gigawatts (GW) of solar panels in 2024, twice the volume recorded the year before, to meet rising consumer demand, according to the Global Electricity Review 2025.

“The 18 percent on top of 46% was an additional burden,” Dar told the National Assembly.

“So, regarding this, after consultations and deliberations, we have decided that this year we will keep a 10% sales tax and not 18%.”

Dar highlighted how this was the most debated subject after the budget was announced.

He also explained that around 46% of components used in solar installations in Pakistan were imported while the remaining 54% including inverters and other equipment were locally sourced and already subject to standard taxation.

Solar energy has supplied 25% of Pakistan’s grid electricity so far this year, placing the country among fewer than 20 globally that generate at least a quarter of their monthly power from solar farms.

Industry stakeholders and clean energy activists had warned that the added cost in tax could slow the rapid adoption of rooftop solar systems by households and businesses, potentially undermining national targets for expanding the share of renewables in the country’s energy mix.

Pakistan increased its solar electricity generation at a rate more than three times the global average in 2025, driven by a surge in solar capacity imports that were over five times higher than in 2022, according to data from Ember, a UK-based energy think tank.

This rapid growth in both capacity and output has propelled solar energy from being the country’s fifth-largest power source in 2023 to the top spot in 2025.