KARACHI: Despite mounting pressure from industry for immediate relief, a rate cut in the upcoming monetary policy appears unlikely, as the International Monetary Fund (IMF) has advised maintaining tight liquidity to curb expected inflation.

Industrial leaders have called for a reduction in interest rates to help them stay competitive globally, but the government appears satisfied with low economic growth, shrinking exports, rising imports and worsening poverty.

Several manufacturers have already begun shifting operations to Egypt, Mexico, Dubai and Vietnam. Some analysts say pressure is building for at least a 100 basis point cut when the policy is announced on Monday, though most believe the IMF’s stance will prevail.

The last reduction in the policy rate came in May. Since then, the benchmark rate has held at 11 per cent, even as headline inflation dipped to three per cent earlier this year. November inflation was recorded at 6.1pc, compared to 6.2pc in October.

The IMF, which released a $1.2 billion tranche on Thursday, praised the State Bank for maintaining positive real interest rates on a forward-looking basis and said the monetary stance must remain tight and data-driven.

Industrialists demand reduction to stay competitive globally

For the past three years, high interest rates have weighed on growth — first due to record 38pc inflation and now despite inflation falling sharply. Economic expansion has averaged below 2pc, while the central bank has remained focused on “sustainable growth”.

“With inflation under control, PKR holding steady, and reserves outperforming targets, it is imperative for SBP to pivot,” Interloop Limited CEO Musadaq Zulqarnain said in a post on X.

Interloop recently installed a textile unit in Egypt. He said Pakistan’s growth engine had stalled and the industry was under severe stress. “A timely reduction in rates will catalyse business activity — and materially ease the government’s fiscal burden. The moment calls for decisive monetary support,” he added.

However, senior banker Rashid M. Alam said inflation is unlikely to decline any further. If the monetary stance is guided strictly by inflation, then the State Bank should keep the rate as it is at 11pc, he said.

He added that the market remains uncertain, and any rate-cutting cycle amid high inflation, political uncertainty, border tensions, elevated petroleum prices and a widening current account deficit could trigger instability. Considering all these things, the case is to stay neutral, he said.

A former caretaker federal commerce minister, who is also an industrialist, posted on X that Pakistan’s interest rates are nearly twice those of regional economies, including China and India.

“Over the last 36 months, we have attempted to stabilise the economy but achieved less than 2 per cent aggregate growth,” he said, urging the government to reduce interest rates to around 6pc and bring real interest rates down to 1pc.

Published in Dawn, December 13th, 2025

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The State Bank of Pakistan (SBO) is expected to retain interest rates at 11 per cent on Monday, a Reuters poll showed, as analysts push back rate-cut forecasts to late 2026 after the International Monetary Fund warned inflation risks persist and policy must stay “appropriately tight”.

All 12 analysts surveyed expect no cut in the policy meeting scheduled for Monday.

A majority of them see inflation hovering at 6pc–8pc in the coming months before rising again towards the end of fiscal 2026 as base effects fade and food and transport prices stay volatile after flood-related supply disruptions.

Most respondents now believe the SBP will not begin easing until the closing months of FY26, which ends in June 2026, with some analysts pushing forecasts for the first cut into fiscal year 2027, beginning July 2026.

IMF warns against premature easing

The IMF, in a second review released on Thursday, said monetary policy needs to remain “appropriately tight and data-dependent” to keep expectations anchored and noted that the SBP had maintained positive real interest rates on a forward-looking basis.

It said the tight stance had been pivotal in reducing inflation and should be maintained to ensure price stability and support the rebuilding of external buffers.

Analysts said these risks, along with the SBP’s preference for maintaining positive real interest rates, would keep policymakers cautious.

The SBP has held its policy rate at 11pc since September, after cutting it by 1,100 basis points between June 2024 and May 2025 as inflation fell sharply from highs near 40pc in 2023.

Price, external pressures edge up

Inflation has started to accelerate after months of decline, driven by food and transport costs and fading base effects.

Headline inflation eased to 6.1pc in November from 6.2pc in October but remained above the SBP’s 5–7pc target. The IMF expects inflation to temporarily accelerate to 8–10pc this fiscal year before stabilising.

While Pakistan’s macroeconomic backdrop has stabilised somewhat, analysts said the recovery remains sensitive to external pressures.

Premature rate cuts could pressure the rupee even with anticipated IMF inflows, including a $1.2 billion disbursement this week to bolster reserves and support climate-resilience reforms.

Any demand-driven uptick, said Sana Tawfik, head of research at Arif Habib Ltd, “will have an adverse impact on the external front”.

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KARACHI: Sales of cars, pickups, vans and sport utility vehicles surged 52 per cent year-on-year to 15,442 units in November, but declined by 11pc month-on-month.

The yearly growth numbers are fuelled by new entrants alongside falling interest rates, easing inflation, and improving macroeconomic sentiments. The MoM drop was due to seasonality, wherein generally, before the year-end delivery of vehicles is deferred to first month of next year for latest model registration.

According to Topline Research the overall auto sales during 5MFY26 rose by 48pc to 75,042 units YoY from 50,856 units in 5MFY25.

Honda Atlas Cars Ltd (HACL) posted highest YoY growth of 135pc YoY and remained flat on MoM basis to 2,609 units in November. Sales during 5MFY26 stood 10,096 units, up by 69pc YoY.

Indus Motor Company (IMC) posted the YoY growth of 75pc to 3,833 units. Sales during 5MFY26 had surged by 68pc to 18,251 units as compared to same period last fiscal year.

Hyundai Nishat reported YoY growth of 38pc in November to 1,001 units, but fell by 8pc MoM, while 5MFY26 sales rose by 71pc 5,699 units.

Sazgar Engineering reported sales of 1,109 units, up 90pc YoY but down 20pc MoM, while 5MFY26 sales rose by 44pc to 6,045 units.

Pak Suzuki saw the surge of 23pc YoY reaching 6,615 units in November but witnessed an 11pc fall MoM. Cumulative sales went up by 31pc to 33,849 in 5MFY26 from 25,812 units in same period last year.

Sales of two- and three-wheelers increased by 38pc YoY and remained flattish MoM, totalling 165,753 units in November. Atlas Honda Ltd witnessed record monthly sales yet again at 140,382 units in November, while 5MFY26 sales surged 33pc to 647,887 units.

Tractors’ sales rose by 7pc YoY and 27pc MoM to 3,663 units in November due to government tractor scheme and improving farm economics, but remained flat by 8pc in 5MFY26 to 9,530 units. Truck and bus sales surged 62pc YoY but down 31pc MoM to 530 units in November, while sales rose by 97pc in 5MFY26 to 3,159 units.

Published in Dawn, December 12th, 2025

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