Pakistan’s efforts to keep its economy stable during a difficult year have received strong recognition in a new assessment by the International Monetary Fund.
The Fund’s staff-level review, released after its second evaluation, points to the State Bank of Pakistan’s tight and data-based policy decisions as a major reason the country has been able to manage recent challenges, including the impact of floods on prices and growth.
Inflation expectations kept in check
The review notes that holding the policy rate at 11 percent has helped anchor inflation expectations, even as temporary supply disruptions created uncertainty. According to the IMF, the central bank’s careful approach has kept inflation moving toward its medium-term target of 5 to 7 percent. It adds that the bank has shown resilience by managing inflation risks while still trying to support a gradual economic recovery.
The IMF also highlights improvements in the State Bank’s communication practices. Regular monetary policy reports and updated inflation expectation surveys have improved transparency and made it easier for businesses and households to understand the direction of policy.
The report urges continued vigilance, warning that the effects of floods still need close monitoring because they can influence both prices and the country’s external position. It states that the central bank should be prepared to act if inflation expectations begin to drift.
Focus on reserves and the foreign exchange market
Pakistan’s efforts to rebuild its foreign exchange reserves were also acknowledged. The IMF notes that measures such as the updated Foreign Exchange Exposure Limits for banks have added more flexibility to the market while keeping risk controls intact. It encourages Islamabad to keep improving remittance channels and to gradually reverse some capital flow restrictions once the broader economy is stable.
Beyond monetary policy, the review welcomes ongoing work to strengthen capital markets and improve regulatory standards. This includes progress in anti-money laundering and counter-terrorist financing frameworks and steps to regulate newer sectors such as virtual assets. The Fund notes that such reforms are important for protecting investors and maintaining financial transparency while still allowing innovation.
Path ahead
According to the IMF, Pakistan’s combination of rebuilding reserves, improving the foreign exchange market, and advancing financial sector reforms places the country in a better position to manage short-term shocks and set the foundation for long-term growth.
The review concludes that Pakistan’s ability to maintain a tight, data-focused monetary policy and a flexible exchange rate will be central to sustaining economic stability and investor confidence in the months ahead.
