ISLAMABAD, Jan. 26 (Xinhua) -- Pakistan's central bank on Monday kept its benchmark policy rate unchanged at 10.5 percent, mentioning steady headline inflation, improving economic growth prospects, and a relatively contained external account, the bank's statement said.
According to the statement from the State Bank of Pakistan, the Monetary Policy Committee noted that headline inflation eased to 5.6 percent year-on-year in December 2025, while core inflation steadied around a relatively higher level of 7.4 percent.
It said recent high-frequency indicators showed that economic activity was gaining momentum, driven mainly by domestic-oriented sectors, including large-scale manufacturing.
The committee observed that the trade deficit had widened due to a sharp increase in imports and a decline in exports, it said, adding that workers' remittances and benign global commodity prices helped keep the current account deficit relatively contained.
Pakistan's real gross domestic product grew by 3.7 percent year-on-year in the first quarter of fiscal year 2026 (July 2025 to June 2026), compared with 1.6 percent in the same period last year, led by industry and agriculture.
On the external front, the current account posted a deficit of 244 million U.S. dollars in December 2025, taking the cumulative deficit to 1.2 billion dollars in the first half of the fiscal year.
The committee also noted that foreign exchange reserves of the central bank rose to 16.1 billion dollars as of Jan. 16, 2026, mainly due to interbank foreign exchange purchases. However, it added that tax revenue growth slowed in the first half of the fiscal year, falling short of targets, though lower interest payments helped contain overall expenditures.
It said broad money growth picked up to 16.3 percent in early January, driven by higher private sector credit and government borrowing. ■