Pakistan’s Finance Minister, Muhammad Aurangzeb, has indicated that there is scope to lower the monetary policy rate before the end of the year according to the Dawn newspaper.

Since June 2024, the State Bank of Pakistan (SBP) has reduced interest rates by a total of 1,000 basis points from 22% in seven intervals. The rate has been held at 11% since May, a move that has drawn criticism from the business community.

Aurangzeb said that both average and core inflation figures provided space for the SBP to ease rates further. He also linked national security with economic stability, citing military successes in recent conflicts with India.

Highlighting economic achievements over the past 18 months, he pointed to growth in GDP and per capita income, a reduction in the fiscal deficit and inflation, improvements in the current and external accounts, and record increases in foreign exchange reserves and remittances.

Exports in the textile, IT and pharmaceutical sectors have posted double-digit growth. Loans to small and medium-sized enterprises have risen by 41%, while agricultural lending has exceeded PKR2.5 trillion ($8.8bn). Private sector loans are up 38%.

Aurangzeb stressed that stronger fiscal discipline would reduce the government’s borrowing needs, allowing banks and other financial institutions to direct more funds to the private sector. He noted that debt servicing had been cut by PKR1 trillion over the past year, with a further reduction of more than PKR1 trillion expected this year.