KARACHI: Pakistan’s central bank on Monday slashed the key policy rate by 100 basis points 11% to spur growth, amid challenges posed by trade tariffs and geopolitical tensions with archrival India.
The State Bank of Pakistan (SBP) said global uncertainty surrounding trade tariffs and geopolitical developments warranted a “measured monetary policy stance,” espite the favorable inflation outlook. This is the lowest rate since December 2021.
Monday’s decision came against the backdrop of soaring tensions with neighboring India following a deadly attack on tourists in Indian Kashmir. The nuclear-armed neighbors have announced measures meant to harm each other’s economy.
It also came ahead of an imminent decision by the International Monetary Fund to release the next tranche of $1 billion to Islamabad from its $7 billion bailout program, with the previously “sticky” core inflation easing to 8% in April.
“The committee noted that inflation declined sharply during March and April, mainly due to a reduction in administered electricity prices and continued downtrend in food inflation,” the central bank said in a statement after a meeting of its monetary policy committee (MPC).
Prime Minister Shehbaz Sharif government’s efforts to revive Pakistan’s debt-ridden economy with the help of International Monetary Fund (IMF) received repeated setbacks after the US imposed 29% tariffs on its imports, followed by a military standoff with neighboring India that holds Islamabad responsible for the recent Kashmir attack. Given this the central bank decided to maintain a measured monetary policy stance.
The IMF has sharply downgraded its 2025 and 2026 growth projections for advanced and emerging economies because of the prevailing global uncertainty around tariffs that has triggered heightened financial market volatility and a sharp decline in global oil prices.
“Considering the evolving developments and risks, the MPC viewed that the real policy rate remains adequately positive to stabilize inflation in the target range of 5 – 7%, while ensuring that the economy grows on a sustainable basis,” the SBP said.
The government expects the economy to expand 3.6% this fiscal year ending in June, while the central bank sees it settling between 2.5% to 3.5%, mainly because of low agricultural output and “below expectation” outturns in industrial production.
The central bank expects the economy to expand next fiscal year but warned of risks emanating from global uncertainty.
Shahid Ali Habib, chief executive officer at Arif Habib Corporation Ltd., termed the central bank decision “very good” and said lower borrowing costs will create economic activity in the South Asian nation where the full-year inflation is expected to remain at 5%, the current account to post nearly $1.3 billion surplus and international oil prices to range between $60 and $62 a barrel.
“The State Bank wants to spur some growth as our large-scale manufacturing growth remains very low at around 1.9%,” Habib told Arab News. “This is a very good decision to kick off economic growth in the country.”
Debt-ridden Pakistan, which had repaid or rolled over most of the $26 billion foreign loans it had to repay this year, expects its foreign exchange reserves to increase to $14 billion by the end of next month on the back of expected realization of planned official inflows.
The IMF’s executive board is scheduled to meet later this week to approve the release of about $1 billion tranche to Pakistan. The board’s approval has most of the time been a formality after the signing of a staff-level agreement between the Washington-based lender and the authorities in Islamabad.
The country’s trade deficit though sharply rose to $3.4 billion in April, but the central bank said easing global oil prices were moderating Pakistan’s overall import bill.
Last month, Pakistan’s trade deficit widened by 55% to $3.39 billion, marking the highest monthly trade gap in three years, according to Topline Securities Ltd.
“Going forward, the MPC expects this build-up in FX reserves to continue in FY26, based on a moderate current account deficit and improved financial inflows,” the SBP said.
The record inflow of worker remittances and the SBP’s purchases of dollars partially cushioned the impact of large ongoing debt repayments on the central bank’s forex reserves that have declined to $10.2 billion.
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI), the country’s top representative body of trade and industries, expressed disappointment over the SBP’s decision.
“The policy rate continues to be 11.0% as of today – which reflects a premium of 1,070 basis points (bps) as compared to inflation and it makes no economic sense,” FPCCI President Atif Ikram Sheikh said in a statement, demanding a cut of 500 basis points.
Monday’s cut was higher than market expectations as majority of the economists were expecting a 50 basis points cut, according to Mohmmed Sohail, chief executive officer at Topline Securities Ltd., which last month conducted a poll on rate cut expectations.
“We will see gradual economic growth led by lower rates,” said Sohail, who expected another 100 basis points reduction in the interest rate by December.
Pakistan cuts interest rate to spur growth as ‘geopolitical’ tensions pose economic challenges
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Pakistan cuts interest rate to spur growth as ‘geopolitical’ tensions pose economic challenges
- Monday’s decision came against the backdrop of soaring tensions with neighboring India following a deadly attack on tourists in Indian Kashmir
- The central bank expects the economy to settling between 2.5 and 3.5%, mainly because of low agricultural output and industrial outturns
Pakistan hosts seven-member Bangladeshi delegation to boost academic ties
- Vice chancellors of Bangladesh universities met counterparts from top 15 Pakistani universities
- Once a single country, Pakistan and Bangladesh have begun slowly rebuilding diplomatic ties
ISLAMABAD: A seven-member delegation from Bangladeshi universities is currently visiting Pakistan to deepen academic and scientific cooperation between the two countries, the Organization of Islamic Cooperation’s coordinating body for scientific collaboration said on Thursday.
Pakistan and Bangladesh, once a single country before the bloody 1971 war, have slowly begun rebuilding ties after last year’s political upheaval in Dhaka, which saw the ouster of Prime Minister Sheikh Hasina Wajid, long viewed as critical of Islamabad and aligned with New Delhi.
She fled to India by helicopter after her administration’s downfall in August 2024, with Dhaka now seeking her extradition.
The ties between India and Bangladesh’s interim government have become frosty, creating space for Islamabad and Dhaka to re-engage after decades of limited contact.
“The forum brought together a seven-member Bangladeshi delegation comprising vice chancellors and senior representatives from leading universities, and vice chancellors from 15 top Pakistani universities, which are part of COMSTECH Consortium of Excellence,” the OIC-COMSTECH said in a statement, adding that academics from Bangladesh are visiting Pakistan from June 16-21.
The visiting delegation termed their ongoing visit as “historical, highly productive and promising” for academic collaboration between Bangladesh and Pakistan.
Vice chancellors from Pakistani and Bangladeshi universities held discussions aimed at deepening academic and scientific cooperation, it added.
The meetings focused on expanding collaboration in key areas including student and faculty exchange programs, scholarship opportunities, joint research initiatives apart from sharing academic expertise.
The participants of the meeting also agreed that each university would appoint a focal person to ensure effective follow-up on commitments made during the visit.
Bangladesh High Commissioner to Pakistan Iqbal Hussain Khan, the chief guest at the event, praised COMSTECH for offering scholarships, organizing the visit and facilitating meaningful academic exchanges between higher education institutions of the two countries.
In May, Pakistan’s Foreign Minister Ishaq Dar agreed to strengthen bilateral relationship with Bangladesh and maintain high-level contacts with its leadership.
Pakistan’s government launched a new program in December 2024 through which it will provide fully funded scholarships to 300 Bangladeshi students.
Prime Minister Shehbaz Sharif met Bangladesh Chief Adviser Dr. Muhammad Yunus in New York last year at a ceremony hosted by the Bangladeshi leader to mark the completion of 50 years of Bangladesh’s membership in the United Nations.
Both sides had agreed to forge stronger ties and enhance bilateral cooperation in various fields during their meeting.
Five groups submit qualification documents in Pakistan’s renewed push to privatize PIA
- Eight interested parties, including private firms and a military-backed group, initially submitted expressions of interest
- Pakistan’s Privatization Commission will evaluate the qualification documents before advancing to the next stage
KARACHI: Pakistan has received qualification documents from five investor groups seeking to acquire a controlling stake in its loss-making national carrier, the Privatization Commission said on Thursday, as the government advances a long-delayed divestment plan.
The privatization of state-owned entities has been mandated by the International Monetary Fund (IMF) as Pakistan works to implement structural reforms and stabilize its economy, which has recently shown signs of macroeconomic improvement.
Pakistan International Airlines (PIA), in particular, has survived for years on government bailouts, placing further strain on the country’s already cash-strapped finances.
The government invited expressions of interest in April for a stake ranging from 51 percent to 100 percent in Pakistan International Airlines Corporation Limited (PIACL), along with management control. The final deadline for submitting Statements of Qualification (SOQs) was today.
“The Privatization Commission received Expression of Interest (EOI) from ... eight interested parties,” the official statement said, adding that “five interested parties submitted SOQs by the deadline today.”
Among the groups that submitted documents are a consortium comprising Lucky Cement, Hub Power Holdings, Kohat Cement, and Metro Ventures; a consortium led by Arif Habib Corporation with Fatima Fertilizer, City Schools and Lake City Holdings; Air Blue Limited; Fauji Fertilizer Company Limited, which is a military-backed firm; and a consortium including Serene Air, Augment Securities, Bahria Foundation, Mega C&S Holding and Equitas.
The government had previously attempted to privatize PIA in 2024 but called off the process after receiving a single bid of Rs10 billion ($36 million) from Blue World City — far below the Rs85 billion ($305 million) floor price.
The sale was scrapped, citing the airline’s weak financial position and unattractive terms for buyers.
PIA has long been a fiscal liability, with operational earnings repeatedly offset by heavy debt servicing. However, following restructuring, it reported an operating profit of Rs9.3 billion ($33.1 million) in April, its first in 21 years.
“The SOQs submitted by the parties will be evaluated by the Privatization Commission against the prequalification criteria,” the official statement informed. “The prequalified parties will proceed to the next stage where they will be given access to the virtual data room to undertake buy-side due diligence.”
Pakistan draws five potential buyers for national air carrier
- The interested parties include business groups and a military-backed firm
- The sale is seen as a test of Pakistan’s ability to shed loss-making state firms
ISLAMABAD: In its efforts to sell its struggling national airline, Pakistan has received expressions of interest from five parties, including business groups and a military-backed firm, the Privatization Ministry said on Thursday.
The bids were submitted ahead of a June 19 deadline to acquire up to 100 percent of Pakistan International Airlines, which has accumulated over $2.5 billion in losses in roughly a decade.
Still, following a major restructuring, it posted its first operating profit in 21 years in the year through June 2024.
The sale is seen as a test of Pakistan’s ability to shed loss-making state firms and meet conditions of a $7 billion International Monetary Fund bailout. It would be the country’s first major privatization in nearly two decades.
Eight parties submitted their expressions of interest, but only five of them provided documents of qualification, the ministry said in a statement.
Pakistan calls for Israel’s accountability for Iran war after army chief’s meeting with US president
Pakistan calls for Israel’s accountability for Iran war after army chief’s meeting with US president
- The foreign office condemns Tel Aviv’s ‘unjustified and illegitimate aggression’ during weekly foreign office briefing
- It says Islamabad has always advocated for diplomatic solutions, will support meaningful efforts toward de-escalation
ISLAMABAD: Pakistan’s foreign office on Thursday called on the international community to end Israel’s ongoing war against Iran, condemning Tel Aviv for launching an “unjustified and illegitimate” attack and demanding its accountability.
The statement came hours after Pakistan’s army chief, Field Marshal Syed Asim Munir, attended a luncheon at the White House hosted by US President Donald Trump, a rare engagement that lasted longer than scheduled.
Trump, who has publicly backed Israeli Prime Minister Benjamin Netanyahu and stated Iran will not be allowed to acquire nuclear weapons, confirmed that the Israel-Iran conflict was discussed during his meeting with Munir.
While he did not share further details, Pakistan has maintained its longstanding position that Israel’s war with Iran threatens to destabilize the region.
“Pakistan strongly condemns unjustified and illegitimate aggression by Israel against the Islamic Republic of Iran,” foreign office spokesperson Ambassador Shafqat Ali Khan said at the outset of his weekly press briefing.
“Pakistan stands in resolute solidarity with the people of Iran and unequivocally denounces these blatant provocations, which constitute a grave danger and a serious threat to the peace, security, and stability of the entire region and beyond, with serious implications,” he added. “The international community and the United Nations bear the responsibility to uphold international law, stop this aggression immediately and hold the aggressor accountable for its actions.”
Khan pointed to a joint statement released earlier this week by 20 countries, including Pakistan, calling for an immediate halt to hostilities in the Middle East and urging de-escalation.
The statement underscored the urgent need to establish “a Middle East Zone Free of Nuclear Weapons and Other Weapons of Mass Destruction,” applying to all states in the region without exception.
It further called on all Middle Eastern countries to join the Nuclear Non-Proliferation Treaty (NPT).
Asked whether the United States sought any “special favor” from Pakistan during the army chief’s meeting with Trump, Khan said both nations share “strong and multifaceted relations” with “a full agenda of interaction and cooperation.”
“So, I don’t know how to characterize or define a special favor,” he remarked.
The spokesperson reiterated that Pakistan has consistently advocated for diplomatic solutions to international conflicts and would support any meaningful initiative in that direction.
Locals in Pakistan’s Hunza Valley call for action against hotels ‘polluting’ Attabad Lake
- After a foreign vlogger’s video went viral, officials sealed part of Luxus Hunza Attabad Lake Resort, imposed $5,300 fine
- Resort denies allegations of dumping sewage into the lake, says such actions “would be like desecrating our own house”
KHAPLU, Gilgit-Baltistan: Local social activists in Pakistan’s northern Hunza Valley are demanding strict action against hotels operating around Attabad Lake for failing to meet environmental standards, after a video by a foreign vlogger alleging untreated sewage discharge into the lake went viral on social media this week.
Attabad Lake was formed in 2010 when a massive landslide blocked the Hunza River, killing 20 people and submerging villages and a stretch of the strategic Karakoram Highway that links Pakistan to China. Over the years, the lake has become a major tourist attraction, driving a boom in hotel construction along its banks.
Following the viral video by travel vlogger George Buckley, officials from the Gilgit-Baltistan Environmental Protection Agency (GBEPA) and local administration inspected the hotel’s premises and sewage facilities on Tuesday.
“We have fined Rs 1.5 million ($5,300) on [Luxus Hunza Attabad Lake Resort] hotel after the inspection,” Khadim Hussain, a director at the EPA, confirmed to Arab News.
“A portion of the resort has been sealed for the period of three months. And if they don’t develop a waste treatment plan within the stipulated period of time, the [whole] facility will be sealed and imposed more fines.”
He added: “The action against the hotels that are not complying [with] environmental standards continues in the region before the video of a foreign vlogger.”
Residents say pollution caused by unchecked hotel expansion is now threatening Attabad Lake’s clear blue water, which draws thousands of tourists every year.
“Solid waste is becoming a big issue in the surrounding areas of Attabad Lake and especially on river banks due to the construction of hotels,” Shahid Hussain, a local social activist and politician, told Arab News by phone.
“When the level of the water [in the lake] increases during summer, the level of sewage waste in soakage pits also rises and merges into the lake. This is deteriorating the natural beauty of Attabad Lake.”
He stressed:
“The environmental protection authority has fined one hotel. And this is not a permanent solution. The administration and EPA should give a proper mechanism to protect nature and clean water.”
Another activist, Zahoor Ilahi, echoed the call for tougher enforcement.
“Initially, when locals started to build miniature resorts and hotels, the municipal and district administration teased the locals in the name of NOC [No Objection Certificate],” he said.
“Later big investors came to the region and built big hotels, and there is no treatment plant for sewage waste. If the [Luxus] hotel has no treatment plan, then the whole resort should be sealed instead of imposing a fine on them.”
Ilahi warned that untreated wastewater could also threaten local drinking water projects:
“A project is underway to supply drinking water from Attabad Lake for central Hunza under a federal PSDP project. So, the protection of clean water is very much needed. If the government fails to protect the clean water, it will multiply the miseries of locals.”
In a Facebook post, the Luxus Resort rejected the allegations.
“Attabad Lake formed in 2010. Before Luxus Hunza opened its doors to tourists in 2019, no one had experienced this majestic lake up close. This lake has been home for us for the last six years. It is the reason and purpose of our existence. To dump sewage water into the lake would be like desecrating our own house. We have never nor will we ever dump a single liter of waste water into Attabad Lake,” the hotel management said.
It added that the cloudy appearance of the lake near the hotel was due to natural sediment from mountain streams mixing with the clear lake water, not sewage discharge.
Arab News attempted to contact a representative of Luxus Hotel Hunza for further comment but did not receive a response by the time of filing this report.
