Pakistan pauses rate cuts, but likely not for long

A logo of the State Bank of Pakistan (SBP) is pictured on a reception desk at the head office in Karachi, Pakistan July 16, 2019. (REUTERS/File)
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Updated 12 March 2025
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Pakistan pauses rate cuts, but likely not for long

  • Experts say rate cuts alone cannot help meet growth targets, must be complemented by other measures
  • They believe Pakistan will wait for more clarity on the external front before gradually resuming rate cuts

KARACHI: With inflation cooling, Pakistan’s central bank hit pause on its multiple rounds of monetary easing that might have risked destabilising its currency or worsening the trade deficit.
Economists said the government should shift its focus to implementing economic reforms as interest rate cuts are not the elixir for growth, after the country’s central bank on Monday unexpectedly kept interest rates unchanged at 12 percent.
“The rate cuts alone may not meet growth targets,” said Vaqar Ahmed, economist and team lead with Oxford Policy Management. “They need to be complemented by prudent fiscal measures, such as tax reforms, energy sector viability and privatization of state-owned enterprises, to encourage private sector investment and prevent crowding out.”
The central bank’s rate hold snapped the largest easing cycle in the country’s history, disappointing some businesses burdened by high borrowing costs.
Economists had expected a cut on Monday, following a series of cuts totalling 1,000 basis points from a record high of 22 percent in June last year to revive the economy.
The economy, which grew 0.9 percent in the first quarter, is expected to gain momentum for the rest of the fiscal year, according to central bank chief Jameel Ahmad. Though first-quarter growth is well below its 2.5 percent-3.5 percent target for the year, the economy is not stalling.
However, Pakistan’s energy tariffs and the need for fiscal austerity measures under the International Monetary Fund program pose significant challenges to reviving demand.
Most economists expect the central bank to resume cuts soon, either later this fiscal year or at the start of the next one despite concerns around the trade deficit and impact on the currency. Pakistan’s trade deficit in January increased 18 percent year on year to $2.313 billion.
The central bank is “likely to wait for more clarity on the external front or until they are confident about achieving their medium-term inflation target of 5-7 percent,” said Saad Hanif, head of research at Ismail Iqbal Securities.
“Once that happens, I expect them to resume rate cuts, though at a slower pace.”
Ehsan Malik, CEO of Pakistan Business Council (PBC), warned that cutting rates on Monday would have necessitated a reversal soon, as monetary easing raises imports and trade deficits, which put pressure on the exchange rate, fueling inflation.
The cash-tight nation is navigating reforms under a $7 billion IMF program approved in September. The first instalment of the loan is under review, and if successful, Pakistan will receive a tranche of $1 billion.

REVIVE DEMAND AND INVESTMENTS

Inflation in Pakistan soared to around 40 percent in May 2023, driven by currency devaluation and subsidy removals for IMF approvals. But inflation dropped to a near-decade low of 1.5 percent in February, providing room for the central bank to boost growth.
Economists also warn of the risk of the government taking advantage of lower interest rates to increase borrowing for an expansionary budget. That would potentially destabilize the progress made under the IMF program and crowd out the private sector.
Pakistan’s central bank reported government borrowing has rebounded, while private sector credit jumped 9.4 percent in the second quarter of the current fiscal year.
However, purchasing power constraints were expected to remain a deterrent to revived borrowing and investment.
“Consumer purchasing power will take time to recover from the 75 percent+ price surge between 2021-2024,” said Mustafa Pasha, executive director at Lakson Investments.
Asfandyar Farrukh, chairman of the Chainstore Association of Pakistan, said stagnant incomes and increased taxes have reduced consumer spending power.
Retail volumes of renowned brands fell 10-15 percent over the past year and a half, with “razor-thin profit margins” due to frequent discounts, he said, adding that medium and large retailers were consolidating to cope, or were shutting down, leaving only a few “deep-pocketed players” investing in growth.

HIGH DEBT
Pakistan’s banking sector holds the world’s largest proportion of government securities relative to its total assets, according to an October 2024 IMF report.
The high domestic debt, mainly financed by banks, crowds out private sector credit, hindering policy transmission, reducing the impact of interest rate changes on the private sector, the IMF said in its report.
Reza Baqir, former chief of the State Bank of Pakistan, stressed the importance of foreign exchange stability for sustaining economic growth in Pakistan, given its history of current account issues after periods of high consumption and import-led growth.
Pakistan usually sets its budget for the year in June, with the fiscal new year running July 1 to June 30.
“Where there is fiscal dominance, there is relatively little that monetary policy will be able to do to prevent a current account deficit blow-out” if political or other developments lead to populist budgetary policies,” he warned.


Pakistan says two ‘dangerous’ fugitives wanted in several cases arrested in Spain

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Pakistan says two ‘dangerous’ fugitives wanted in several cases arrested in Spain

  • Nawazish Ali Hanjra is wanted in 23 cases on charges ranging from “terrorism” to murder and kidnapping for ransom
  • Pakistan says has demanded the arrest and extradition of 38 fugitives from Spain via Interpol’s Red Notices for years

ISLAMABAD: Spanish authorities have arrested two “dangerous” fugitives wanted in several cases such as murder, “terrorism” and kidnapping for ransom, Pakistan’s state-run media reported recently, with Islamabad hoping other absconders in the European country would also be apprehended and extradited soon. 

As per details shared by the state-run Associated Press of Pakistan (APP), Nawazish Ali Hanjra is wanted in 23 cases including “terrorism,” murder and kidnapping for ransom while Haroon Iqbal, the other suspect, is wanted in a separate case. These two were arrested in Spain on Interpol’s Red Notices, APP said.

Pakistan’s Minister of State for Interior Tallal Chaudry, during his recent visit to Spain, met Spanish Interior Minister Fernando Grande-Marlaska to demand the arrest and extradition of the two suspects, APP said. The Spanish interior minister acted swiftly and issued directives to authorities in this regard.

“This is a major step forward in our commitment to justice,” Chaudry was quoted as saying by APP on Sunday. “I am grateful to the Spanish authorities for understanding the gravity of the situation and taking swift action. We hope to see the remaining fugitives arrested and extradited soon.”

APP said Islamabad has demanded the arrest and extradition of 38 fugitives from Spain via Interpol’s Red Notices for years. It said these individuals managed to evade justice for years, exploiting legal loopholes and the lack of coordination between international enforcement agencies.

The state-run media said legal proceedings are underway to facilitate Hanjra’s and Iqbal’s extradition to Pakistan, where they will face trial under the country’s anti-terror and criminal laws.

“The development is being hailed as a milestone in international law enforcement cooperation and a sign that Pakistan is intensifying efforts to bring back criminals who have found refuge abroad,” APP said. 


At least 45 killed, 68 injured since June 26 as monsoon rains batter Pakistan 

Updated 46 min 18 sec ago
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At least 45 killed, 68 injured since June 26 as monsoon rains batter Pakistan 

  • Khyber Pakhtunkhwa reports highest casualties, 21, followed by Punjab with 13, Sindh with seven and Balochistan with four deaths
  • Pakistan has forecast widespread rain with wind and thundershowers across various regions of the country from June 29 to July 5

ISLAMABAD: At least 45 people have been killed and 68 injured across Pakistan in rain-related incidents since June 26, the National Disaster Management Authority (NDMA) said in its latest report as heavy monsoon rains continued to batter the country. 

Heavy rains have lashed Pakistan’s Khyber Pakhtunkhwa (KP), Punjab and Sindh provinces since June 26, raising water levels in rivers to alarming levels and triggering floods in various cities across the country. 

The latest casualties took place as the NDMA issued multiple impact-based weather alerts on Sunday, forecasting widespread rain with wind and thundershowers, accompanied by isolated heavy falls across various regions of Pakistan from June 29 to July 5. 

“NDMA urges all provincial and district administrations to remain on high alert, activate contingency plans, and ensure timely dissemination of warnings in local languages,” the authority said on Sunday. “Citizens, especially those in high-risk areas, are advised to stay updated through official adviseries, avoid unnecessary travel near glacial streams, riverbanks, and flooded roads, and keep emergency kits ready.”

As per the latest NDMA situation report, 45 people have been killed and 68 injured from June 26-29 in Pakistan’s KP, Punjab, Sindh and Balochistan provinces. The casualties include 23 children, 12 men and 10 women. 

KP reported the highest number of casualties from rain-related incidents, 21, followed by Punjab with 13, Sindh with seven and Balochistan with four deaths. Punjab reported the highest number of injuries at 39 followed by Sindh with 16 while KP reported 11 and Balochistan two. 

The report said flash floods claimed the highest number of casualties, followed by electrocution, drowning, lightning and other factors. 

Pakistan, home to over 240 million people, is considered one of the world’s most vulnerable countries to the effects of climate change and faces extreme weather events with increasing frequency.

These extreme and irregular weather patterns include droughts, heatwaves and torrential rains which experts have attributed to climate change. Unusually heavy rains and the melting of glaciers in June 2022 triggered cataclysmic floods that killed over 1,700 people across Pakistan, washed away swathes of crops and damaged critical infrastructure. Pakistan estimated the damages to be worth over $33 billion.


Pakistani mangoes draw crowds at China-Eurasia Expo as exporters set 125,000-ton target

Updated 30 June 2025
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Pakistani mangoes draw crowds at China-Eurasia Expo as exporters set 125,000-ton target

  • Pakistan is home to over 100 mango varieties like Sindhri, Chaunsa and Anwar Ratol
  • The fruit’s popularity at Chinese exhibition highlights Pakistan’s potential for growth

ISLAMABAD: Pakistan has set a pavilion at the China-Eurasia Expo in Urumqi where mango varities native to the South Asian country have been drawing crowds, the Pakistani embassy said on Sunday, as mango exporters eye 125,000 tons exports this season.

The 2025 China-Eurasia Commodity and Trade Expo, running from June 26 till June 30 in Xinjiang’s Urumqi, has brought together more than 2,800 enterprises and delegates from 50 countries and regions to deepen cooperation across Eurasia, according to the organizers.

Pakistan’s ​Ambassador to China Khalil Hashmi, along with Zhu Lifan, vice chairman of the Xinjiang government, inaugurated the Pakistan Pavilion, displaying a rich array of products, including fruit, jewelry, leather garments, luxury bags and contemporary clothing.

“The pavilion’s showcase of premium Pakistani mangoes drew hundreds of visitors, making it one of the most popular exhibits,” the embassy said in a statement on Sunday. “The fruit’s popularity highlighted Pakistan’s agricultural excellence and potential for growth.”

Pakistan is home to over 100 varieties of mangoes, including Sindhri, Chaunsa and Anwar Ratol.

The South Asian country aims to export 125,000 tons of mangoes this season, a 25,000-ton increase over last year’s export volume, according to the Pakistan Fruit and Vegetable Exporters Association (PFVA). If achieved, the target could generate an estimated $100 million in foreign exchange earnings.

​At the inauguration, Ambassador Hashmi briefed Vice Chairman Zhu about Pakistan’s enhanced focus on increasing trade and investment relations with China, including Xinjiang.

“He [Ambassador Hashmi] gave the Vice Chairman a tour of the Pavilion, elaborating the high-quality of Pakistani products. The Chinese VIP also praised the taste of Pakistani mangoes,” the Pakistani embassy said.

China is a longtime friend and strategic partner of Islamabad, with Beijing making significant investments in infrastructure and energy projects in Pakistan.

The total bilateral trade in goods between China and Pakistan reached $23.1 billion in 2024, an increase of 11.1 percent from the previous year, according to China Customs and the Pakistani embassy. China’s exports to Pakistan surged 17 percent year-on-year to $20.2 billion, while imports fell by 18.2 percent to $2.8 billion.

Islamabad, which is on path to economic recovery under a $7 billion International Monetary Fund (IMF) program, is currently making efforts to expand trade with China, Central Asian and Gulf nations to boost the $350 billion South Asian economy.


Pakistan okays 50 percent increase in fixed gas charges for domestic consumers

Updated 29 June 2025
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Pakistan okays 50 percent increase in fixed gas charges for domestic consumers

  • Gas prices increased for general industries, power stations and independent power producers to shift partial burden
  • The move aligns with structural benchmarks agreed with the IMF, including rationalization of captive power tariffs

ISLAMABAD: The Pakistani government has revised gas prices for the fiscal year 2025-26 and okayed a 50 percent increase in fixed charges for domestic consumers, effective from July 1, the Oil and Gas Regulatory Authority (OGRA) announced on Sunday.

The development comes days after the federal cabinet’s Economic Coordination Committee (ECC) approved the hike in fixed gas charges for domestic users and to shift the partial burden to bulk consumers, like the power sector and industry.

“Protected category to pay a fixed charge of Rs600 and meter rent of Rs40,” an OGRA notification said on Sunday. “Non-protected category to pay a fixed charge of Rs1,500, up to 1.5hm³ (cubic hectometers), while Rs3,000 for exceeding consumption of 1.5hm³ and meter rent of Rs40.”

While the government has increased the fixed charges, the sale prices of gas for both protected and non-protected consumers remain unchanged, according to the notification.

The government also kept prices for tandoors commercial units, compressed natural gas and ice factories unchanged, but increased the rates for general industries, power stations and independent power producers.

The move aligns with structural benchmarks agreed with the International Monetary Fund (IMF), including rationalization of captive power tariffs and a shift from subsidies to direct, targeted support for low-income consumers.


Architectural Digest Middle East lists Lahore’s Wusaaq hotel among world’s best

Updated 29 June 2025
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Architectural Digest Middle East lists Lahore’s Wusaaq hotel among world’s best

  • Tucked behind bougainvillea-covered walls in Lahore’s Gulberg neighborhood, Wusaaq is a mid-century residence-turned-guest house
  • The 1950s Pakistani home, preserved with minimal intervention, shows contemporary Pakistani art blending memory with modern comfort

ISLAMABAD: The Architectural Digest (Ad) Middle East magazine, part of the Condé Nast portfolio, has compiled a list of 31 best hotels in the world in 2025, naming Lahore’s Wusaaq hotel among them.

Launched in 2015, the bi-monthly magazine spotlights exceptional design by Middle Eastern and international talents, provides an exclusive view into the world’s most beautiful spaces and inspires readers to refresh their lives.

These 31 exotic hotels, located in 18 countries, brim with exceptional design ranging from a cinematic new Roman address to a Saudi resort that looks like tiny UFOs have landed on the Red Sea coast to exotic properties in Paris, Dubai, Doha, Mumbai, Luxor and London.

Tucked behind bougainvillea-covered walls in Lahore’s Gulberg neighborhood, Wusaaq is a mid-century residence-turned-soulful guest house that was restored by Faaria Rehman Salahuddin as a tribute to her late mother.

“Quietly luxurious and entirely personal, Wusaaq reflects a kind of hospitality that values presence over polish – a rare, radiant stay in the heart of a lively city,” reads the AD magazine article, published on June 26.

The 1950s Pakistani home has been preserved with minimal intervention – original porcelain tiles, brass fittings, and retro light switches remain intact. Each of the five rooms is named after a flower, with pietra dura inlaid keys inscribed in Urdu and English, according to the publication.

In the courtyard, fruit and a sprawling peepal tree offer shade where guests gather for breakfast served on heirloom crockery. Inside, window chiks, a traditional kitchen dolly, custom furniture, and contemporary Pakistani art blend memory with modern comfort.

In a post on Instagram, Wusaaq said it celebrated the listing.

“We are overwhelmed and humbled by the love and appreciation sent to us by our patrons, guests, friends and family,” the hotel said.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

A post shared by WUSAAQ (@wusaaq)

The list, according to the AD Middle East magazine, offers a space for all sorts of travelers from city break lovers to those who prefer nothing more than an escape into the wilderness.