ISLAMABAD: Pakistan has given the International Monetary Fund (IMF) written assurances that it will maintain a tight monetary stance, including raising interest rates if needed, to counter mounting inflationary pressures arising from the Gulf war.
Islamabad also assured the IMF that it will draw up an action plan to address the rising cost of channelling remittances through banks and exchange companies, while keeping spending within the allocated budget. The government and the State Bank of Pakistan (SBP) told the IMF they would keep monetary policy tight in the coming months. “We stand ready to hike interest rates if the need arises,” officials said.
Flood-related risks had dissipated, paving the way for lowering policy rates by 50 basis points in December 2025, but the SBP’s Monetary Policy Committee (MPC) kept the policy rate unchanged in March 2026 following the eruption of regional conflict. Officials added that Pakistan is reviewing volatility in global food and fuel prices and their impact on domestic prices and core inflation.
On exchange rate flexibility, Islamabad confirmed it will continue using it as a key shock absorber and ensure balance of payment pressures do not affect timely import financing and outward payments. A well-functioning interbank market will help rebuild foreign exchange reserves. Pakistan plans to publish semi-annual reserve targets and continue FX interventions to guide market participants. Onerous regulations burdening banks and clients, including certain documentary requirements, will be removed. The SBP is developing a roadmap for gradual removal of FX restrictions under a structural benchmark for end-March 2027.
To attract remittances, the government will assess costly payment system impediments and develop an action plan by end-May 2026. The Ministry of Finance and SBP will ensure remittance subsidy claims do not exceed budget allocations.
