Key takeaways from Pakistan central bank's monetary policy meeting

The State Bank of Pakistan (SBP) expects its gross foreign exchange reserves to reach $14 billion by the end of June.

Officials confirmed that Pakistan is well on course to meet the IMF’s performance criterion for net international reserves (NIR), set at negative $7.4 trillion. They noted that the country had already surpassed the IMF’s NIR floor for December by a wide margin, and remains firmly aligned with the June-end target as outlined in the Memorandum on Economic and Financial Policies (MEFP).

Rollovers and inflows on track

Pakistan’s financial account remained in negative territory over the past four to five months, with a deficit of $380 million recorded in April alone. The State Bank of Pakistan (SBP) has adopted a cautious stance, as inflows from bilateral and multilateral partners — as well as commercial banks — have fallen short of expectations.

Looking ahead, external financing could face additional pressure if geopolitical tensions in the Middle East intensify, potentially limiting support from countries like Saudi Arabia, Qatar, and even China.

Meanwhile, a few commercial debt rollovers, particularly Chinese loans, are currently being negotiated and are expected to conclude by the end of the month, contributing directly to reserve accumulation.

According to Nukta Research, the SBP is likely to receive around $2.3 billion in inflows from the Industrial and Commercial Bank of China (ICBC), the World Bank, and other multilateral institutions.

For FY25, Pakistan’s gross external financing requirement stands at $28.5 billion, of which nearly all has been secured, leaving just $400 million in pending rollovers expected to conclude in the coming days.

Profitability and liquidity dynamics

The SBP has validated a profit estimate exceeding PKR 2.4 trillion for the fiscal year, which will form a major part of the government’s non-tax revenue stream in FY26. While still substantial, it’s lower than last year’s record haul, reflecting more conservative projections under lower interest rates.

In response to the recent spike in open market operations (OMO), the SBP attributed it to two seasonal and technical factors: currency in circulation due to Eid, and a time lag between official debt repayments and incoming inflows, some of which are expected before June closes.

External account holding up, but risks remain

Despite volatile global conditions, Pakistan’s external account has held up impressively this year. Worker remittances surged 29% year-on-year, reaching $34.9 billion so far, with the full-year target revised to $38 billion — a record-high. The SBP attributed this to a one-off shift from informal to formal remittance channels, which are now likely to be recorded in line with IMF expectations of around $35.7 billion.

Still, SBP officials flagged ongoing risks to the external account from global uncertainties, including geopolitical escalations and rising oil prices, which could eventually pressure the balance of payments.

The officials mentioned that the public debt repayment figures shared by the SBP governor reflect combined obligations of both the central bank and the federal government. In contrast, the IMF’s gross financing need table presents the numbers differently — interest payments are embedded within the current account, while debt repayments include both public and private sector obligations. The IMF accounts for the principal payments only (the amortization side).

Some of these repayments, which the IMF has already confirmed will be rolled over by bilateral and multilateral partners, are categorized as rollovers. As a result, they do not appear as inflows or outflows in the financing tables.

The SBP’s reporting, it emphasized, offers the most comprehensive debt repayment numbers, including all inflows, outflows, rollovers, and refinanced obligations.

Agriculture a drag on growth

Pakistan’s wheat output was recorded at 29 million tonnes, broadly in line with expectations, but overall agriculture growth slowed sharply to just 0.6%. Officials noted that had agriculture held up to previous levels, GDP growth for FY25 could have exceeded 4%. Instead, it is now estimated at 2.7%, with services and industry doing the heavy lifting.

Oil prices in the inflation mix

When asked whether oil price movements are factored into inflation projections, the SBP explained that its baseline assumes current prices (around $75 per barrel), but it does conduct sensitivity analyses under alternate scenarios to assess inflation risks.

What's next

SBP Governor Jameel Ahmed confirmed that the next Monetary Policy Committee (MPC) meeting is expected by end-July, and will include an updated macroeconomic assessment for FY26, covering growth, inflation, and the external outlook.

The SBP’s tone was one of measured confidence — reserves are rising, remittances are booming, and most external repayments are covered. But under the surface, the bank remains alert to global shocks, delayed inflows, and a fragile recovery in agriculture.