Karachi: In a significant move, the State Bank of Pakistan (SBP) has reduced its policy rate by 200 basis points to 17.5%, influenced by a greater-than-expected decline in inflation and favorable global oil and food prices. This adjustment reflects the central bank’s response to evolving economic indicators while maintaining a cautious outlook due to the uncertain nature of global economic trends.

According to AKD Securities Limited, the SBP’s decision takes into account various factors beyond immediate economic data, such as the external account balance and future inflation prospects, aiming to achieve a medium-term inflation target of 5-7%. The SBP Governor emphasized that the policy rate adjustment was not solely focused on reaching a specific interest rate but was part of a broader strategy to stabilize the economy.

The briefing further revealed the SBP’s plans to enhance transparency in its operations, including the publication of semi-annual data on central bank interventions in currency markets and projections for foreign exchange reserves and upcoming debt obligations. Despite significant debt repayments, the SBP expects foreign exchange reserves to reach $12.0 billion by the end of March 2025.

Additionally, the SBP has recorded substantial profits, earning PkR2.5 trillion in FY24, with plans to disburse these funds as dividends to the government shortly. This financial maneuvering comes at a time when non-oil imports have stabilized at levels similar to FY22 and early FY23, primarily due to a significant reduction in oil imports.