SBP Policy Rate Outlook Divided Ahead of MPC Meeting

The Monetary Policy Committee (MPC) of the State Bank of Pakistan (SBP) is scheduled to convene on April 27 to determine the benchmark policy rate. Market assessments, including those by Arif Habib Limited (AHL), suggest that maintaining the current rate at 10.5% remains a plausible outcome under prevailing macroeconomic conditions.

Survey data compiled by AHL indicates that a majority of market participants (61%) anticipate no change in the policy rate. However, a notable proportion expects monetary tightening, with 19% projecting a 50 basis points increase, 17% forecasting a 100 basis points hike, and 3% expecting an increase of 150 basis points.

AHL’s analysis highlights relative stability in Pakistan’s external sector. The country recorded a current account surplus of approximately USD 1.07 billion in March 2026, representing the highest monthly surplus in the past year. This improvement has been supported by robust remittance inflows and a contraction in the trade deficit.

Despite international oil prices remaining elevated at around USD 100 per barrel, the current account deficit for FY2026 is projected at approximately USD 1.6 billion, with potential for further improvement should energy prices moderate. For FY2027, however, the deficit is expected to widen to around USD 3.5 billion, based on an assumed oil price of USD 85 per barrel.

The Pakistani rupee has demonstrated relative stability against the US dollar, supported by a balanced flow of external inflows and outflows. Key inflows include USD 3 billion in fresh deposits from Saudi Arabia, an extension of an existing USD 5 billion facility, USD 750 million raised through Eurobond issuance, and an anticipated USD 1.2 billion disbursement from the International Monetary Fund (IMF). These inflows have offset outflows such as USD 1.3 billion in Eurobond repayments and USD 2 billion in repayments to the United Arab Emirates. Foreign exchange reserves currently stand at approximately USD 15.1 billion, excluding an additional USD 1 billion expected from Saudi Arabia.

Given the presence of these external buffers, AHL analysts consider the case for further monetary tightening to be limited. The current policy rate of 10.5% is viewed as sufficiently restrictive, particularly in light of inflationary pressures being driven primarily by supply-side factors rather than demand-side overheating.

Financial markets have exhibited volatility in response to geopolitical developments, with yields on government securities—including treasury bills and Pakistan Investment Bonds—rising by 100 to 200 basis points during periods of heightened tension, before moderating to increases of 60 to 130 basis points following de-escalation signals.

At the global level, major central banks—including the Federal Reserve, European Central Bank, and Reserve Bank of India—have largely maintained their policy rates, while acknowledging downside risks associated with ongoing geopolitical uncertainties.

AHL has indicated that the near-term monetary policy outlook remains closely tied to geopolitical developments. Greater clarity is expected following the June 2026 MPC decision and the announcement of the federal budget.

In contrast, Topline Securities presents a more hawkish outlook, indicating a shift in market expectations toward a potential rate increase. According to its survey, 53% of respondents anticipate a rate hike, with 41.2% expecting an increase in the range of 50–100 basis points, 10% forecasting a smaller increase of 25–50 basis points, and 2% projecting an increase exceeding 100 basis points. Meanwhile, 43% expect no change, and 4% foresee a potential rate cut of 50–100 basis points.

Topline Securities has projected a 50 basis points increase in the upcoming policy decision, citing concerns over inflationary pressures arising from elevated energy costs and their broader macroeconomic impact.