Finance Minister Muhammad Aurangzeb has expressed optimism about a potential key policy rate cut by the State Bank of Pakistan (SBP) later this year, aligning with the current inflation trends. His comments, made on Wednesday, come as a Reuters poll indicates that market watchers widely expect the SBP to reduce its key interest rate by 100 basis points next week. The central bank has maintained the rate at a record 22% for seven consecutive policy meetings.

Speaking at the Pak-China Business Forum in Shenzhen, Aurangzeb highlighted the stability of Pakistan’s foreign exchange reserves, attributing it to both administrative measures and structural reforms. He noted that inflationary pressures had eased to just above 11%, surpassing the market consensus of 14%.

While acknowledging that the central bank controls the policy rate, Aurangzeb stated, “We do expect that the policy rate will start moving down in line with inflation because we have now enough cushion in terms of the positive real interest rate that we need to maintain.”

The finance minister pointed out positive market reactions, citing increased foreign investments in the stock exchange and a return of fixed income institutional flows into Pakistan as indicators of growing confidence in the country’s economy.

Aurangzeb also outlined a “road to market” strategy focusing on three key aspects: export-led growth, foreign direct investment (FDI), and access to international capital markets. He emphasized the government’s keen interest in accessing Chinese capital markets and revealed preparations for Pakistan’s inaugural panda bond issue, following a structure similar to Egypt’s approach last year. Pakistan aims to raise $300 million through panda bonds once its credit rating improves.

Over 100 Pakistani businessmen and companies participated in the delegation to Shenzhen, seeking business opportunities ahead of the annual budget.

Regarding foreign reserves, Aurangzeb mentioned that they stand at over $9 billion, providing nearly two months’ worth of import cover. He stressed the importance of not only the quantity but also the quality of these reserves, noting that they have been built without increasing debt stock.

These developments come as Pakistan prepares for its annual budget, with Aurangzeb’s remarks offering insights into the government’s economic strategies and future outlook.


The State Bank of Pakistan (SBP) is widely anticipated to reduce its key interest rate by 100 basis points (bps) next week, following a Reuters poll of market watchers. The central bank has maintained the rate at a record 22% for seven consecutive policy meetings. However, as the rest of the world it seems that the State Bank of Pakistan (SBP) may postpone the lowering of interest rates.

The central bank’s meeting on Monday comes shortly after Pakistan recorded its lowest consumer price index (CPI) in 30 months, with inflation at 11.8% in May — a figure lower than most projections. This decision will precede the announcement of Pakistan’s annual budget.

In the Reuters poll of 16 analysts, the median estimate predicts a 100 bps rate cut. Out of these, ten analysts forecast a 100 bps cut, one anticipates a 150 bps cut, four expect a 200 bps cut, and one respondent believes the SBP will maintain the current rate.

Economic activity in Pakistan has been sluggish over the past two years due to stringent reforms under an IMF bailout aimed at stabilizing the economy. GDP growth is projected at 2% for the current financial year, ending in June, following a negative growth rate in the previous year. The government aims for a 3.5% growth rate this year, anticipating an increase in economic activity.

After completing a short-term programme earlier this year to avoid default, the government plans to approach the IMF for a new long-term bailout this summer. The IMF has previously emphasized the need for a tight monetary policy to manage inflation, which has remained above 20% since May 2022 and reached a record high of 38% last year. However, inflation has since slowed, dropping below 20% in April and to 11.8% in May.




Experienced Senior Research Analyst



Sikander Raza, a Senior Technical Analyst



Hamza Saleem, a Senior Business Analyst



Irsa Sajjad, as a Research Analyst for Equities

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