KARACHI: Pakistan’s central bank on Monday slashed the key policy rate by 100 basis points 11% to spur growth, amid challenges posed by trade tariffs and geopolitical tensions with archrival India.
The State Bank of Pakistan (SBP) said global uncertainty surrounding trade tariffs and geopolitical developments warranted a “measured monetary policy stance,” espite the favorable inflation outlook. This is the lowest rate since December 2021.
Monday’s decision came against the backdrop of soaring tensions with neighboring India following a deadly attack on tourists in Indian Kashmir. The nuclear-armed neighbors have announced measures meant to harm each other’s economy.
It also came ahead of an imminent decision by the International Monetary Fund to release the next tranche of $1 billion to Islamabad from its $7 billion bailout program, with the previously “sticky” core inflation easing to 8% in April.
“The committee noted that inflation declined sharply during March and April, mainly due to a reduction in administered electricity prices and continued downtrend in food inflation,” the central bank said in a statement after a meeting of its monetary policy committee (MPC).
Prime Minister Shehbaz Sharif government’s efforts to revive Pakistan’s debt-ridden economy with the help of International Monetary Fund (IMF) received repeated setbacks after the US imposed 29% tariffs on its imports, followed by a military standoff with neighboring India that holds Islamabad responsible for the recent Kashmir attack. Given this the central bank decided to maintain a measured monetary policy stance.
The IMF has sharply downgraded its 2025 and 2026 growth projections for advanced and emerging economies because of the prevailing global uncertainty around tariffs that has triggered heightened financial market volatility and a sharp decline in global oil prices.
“Considering the evolving developments and risks, the MPC viewed that the real policy rate remains adequately positive to stabilize inflation in the target range of 5 – 7%, while ensuring that the economy grows on a sustainable basis,” the SBP said.
The government expects the economy to expand 3.6% this fiscal year ending in June, while the central bank sees it settling between 2.5% to 3.5%, mainly because of low agricultural output and “below expectation” outturns in industrial production.
The central bank expects the economy to expand next fiscal year but warned of risks emanating from global uncertainty.
Shahid Ali Habib, chief executive officer at Arif Habib Corporation Ltd., termed the central bank decision “very good” and said lower borrowing costs will create economic activity in the South Asian nation where the full-year inflation is expected to remain at 5%, the current account to post nearly $1.3 billion surplus and international oil prices to range between $60 and $62 a barrel.
“The State Bank wants to spur some growth as our large-scale manufacturing growth remains very low at around 1.9%,” Habib told Arab News. “This is a very good decision to kick off economic growth in the country.”
Debt-ridden Pakistan, which had repaid or rolled over most of the $26 billion foreign loans it had to repay this year, expects its foreign exchange reserves to increase to $14 billion by the end of next month on the back of expected realization of planned official inflows.
The IMF’s executive board is scheduled to meet later this week to approve the release of about $1 billion tranche to Pakistan. The board’s approval has most of the time been a formality after the signing of a staff-level agreement between the Washington-based lender and the authorities in Islamabad.
The country’s trade deficit though sharply rose to $3.4 billion in April, but the central bank said easing global oil prices were moderating Pakistan’s overall import bill.
Last month, Pakistan’s trade deficit widened by 55% to $3.39 billion, marking the highest monthly trade gap in three years, according to Topline Securities Ltd.
“Going forward, the MPC expects this build-up in FX reserves to continue in FY26, based on a moderate current account deficit and improved financial inflows,” the SBP said.
The record inflow of worker remittances and the SBP’s purchases of dollars partially cushioned the impact of large ongoing debt repayments on the central bank’s forex reserves that have declined to $10.2 billion.
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI), the country’s top representative body of trade and industries, expressed disappointment over the SBP’s decision.
“The policy rate continues to be 11.0% as of today – which reflects a premium of 1,070 basis points (bps) as compared to inflation and it makes no economic sense,” FPCCI President Atif Ikram Sheikh said in a statement, demanding a cut of 500 basis points.
Monday’s cut was higher than market expectations as majority of the economists were expecting a 50 basis points cut, according to Mohmmed Sohail, chief executive officer at Topline Securities Ltd., which last month conducted a poll on rate cut expectations.
“We will see gradual economic growth led by lower rates,” said Sohail, who expected another 100 basis points reduction in the interest rate by December.
Pakistan cuts interest rate to spur growth as ‘geopolitical’ tensions pose economic challenges
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Pakistan cuts interest rate to spur growth as ‘geopolitical’ tensions pose economic challenges
- Monday’s decision came against the backdrop of soaring tensions with neighboring India following a deadly attack on tourists in Indian Kashmir
- The central bank expects the economy to settling between 2.5 and 3.5%, mainly because of low agricultural output and industrial outturns
Trump hosts Pakistan army chief for unprecedented lunch, confirms Iran discussed
- This was the first time in years that a Pakistani army chief was hosted by a sitting US president at the White House
- Munir was widely expected to press President Trump not to enter Israel’s war with Iran and to seek a ceasefire
ISLAMABAD: US President Donald Trump on Wednesday hosted Pakistan’s army chief for lunch in an unprecedented White House meeting, after which he told reporters he was “honored” to meet Field Marshal General Asim Munir and that the two had discussed the ongoing Iran-Israel crisis.
This was the first time in many years that a Pakistani army chief was hosted by a sitting US president at the White House, highlighting Washington’s renewed interest in maintaining influence in South Asia as regional tensions flare.
After the schedule for the lunch was announced this week, Pakistani media widely speculated that Munir would press Trump not to enter Israel’s war with Iran and to seek a ceasefire. A section of Pakistan’s embassy in Washington represents Iran’s interests in the United States as Tehran does not have diplomatic relations with the US.
Munir’s White House meeting during the ongoing Mideast conflict has also fueled speculation in Islamabad that Washington could push Pakistan to align more openly with the US position, which has historically been supportive of Israel. Such pressure could complicate Pakistan’s delicate balancing act in the Middle East, where it maintains close ties with Iran and other Gulf partners and sympathizes with the Palestinian cause but seeks to avoid getting dragged into regional rivalries that could inflame tensions at home.
“Well, they [Pakistan] know Iran very well, better than most, and they’re not happy about anything [Iran-Israel conflict],” Trump said in response to a question by a reporter after his meeting with Munir on whether Iran came up in the discussion.
“It’s not that they’re better with Israel. They [Pakistan] know them both actually, but they probably, maybe, know Iran better, but they [Pakistan] see what’s going on. And he [Field Marshal General Asim Munir] agreed with me.”
Trump did not specify what the Pakistani general had agreed with him on, and went on to talk about last month’s military conflict between India and Pakistan that the US president has publicly claimed credit for ending with a ceasefire.
Nuclear-armed neighbors India and Pakistan engaged in their fiercest military conflict in decades between May 7-10, exchanging drones, missiles and artillery for nearly four days before Trump announced he had brokered a truce.
“The reason I had him [Munir] here, I wanted to thank him for not going into the war [with India], just, you know, ending the war,” Trump said, also giving credit to Indian Prime Minister Narendra Modi. “So, I was honored to meet him [Munir] today.”
Tensions between Israel and Iran have spiked sharply since last Friday when Israeli forces struck multiple targets including Iranian nuclear sites and senior officials. Iran retaliated with attacks on Israeli territory, raising fears of a wider Middle East war that could threaten global energy supplies and regional stability.
Pakistan, which shares a long border with Iran and maintains historic ties with Tehran, has repeatedly called for de-escalation and a ceasefire in the region. Defense Minister Khawaja Asif told Pakistan’s Geo TV that Munir’s White House visit would give the army chief a chance to share Pakistan’s perspective on the conflict and push Washington to help prevent further escalation.
Pakistan’s military plays a key role in shaping the country’s foreign policy, and Munir’s high-profile White House invitation is being seen as part of Washington’s broader effort to recalibrate ties with Islamabad, a vital but often difficult ally for the US in South Asia.
Local media in Pakistan reported that Munir’s visit had been arranged weeks in advance. Analysts say the rare top-level contact underscores how the US wants to maintain strategic leverage in a region shaped by the rivalries of three nuclear powers — China, India and Pakistan — and rising instability in the Middle East.
Pakistan secures $1 billion in ADB-backed financing from Middle Eastern banks
- The loan aims to strengthen the country’s fiscal resilience, support reform momentum
- The government says the deal signals renewed trust in Pakistan’s economic trajectory
KARACHI: Pakistan has signed a $1 billion syndicated term finance facility backed by Middle Eastern banks, marking its return to the region’s financial markets after more than two years, the finance ministry said on Wednesday.
The five-year facility is partially guaranteed by the Asian Development Bank (ADB) under its Policy-Based Guarantee program, which is linked to fiscal reforms undertaken by Pakistan to improve resource mobilization and economic stability.
The financing by the Middle Eastern banks is structured across Islamic and conventional tranches, with 89 percent of the total amount raised through a Shariah-compliant facility.
“This is a landmark transaction for the Government of Pakistan that demonstrates strong support from leading financiers in the region,” the finance ministry said in a statement.
It informed that Dubai Islamic Bank acted as the sole Islamic global coordinator, while Standard Chartered Bank served as mandated lead arranger and bookrunner.
Other financiers include Abu Dhabi Islamic Bank as mandated lead arranger, and Sharjah Islamic Bank, Ajman Bank and Pakistan’s Habib Bank Limited (HBL) as arrangers.
The deal marks the first time a facility has been backed by an ADB Policy-Based Guarantee linked to specific reform measures undertaken by a member country.
According to the ministry, the ADB’s support helped Pakistan attract significant interest from regional lenders and re-enter global capital markets at a critical time for the economy.
The government said the success of the transaction signals renewed trust in Pakistan’s fiscal outlook and macroeconomic trajectory, marking the beginning of a new partnership with Middle Eastern banks.
Pakistan, which has faced persistent external financing gaps in recent years, has relied on friendly nations and global lenders to stabilize its balance of payments and rebuild investor confidence.
The ADB-backed facility is intended to help strengthen fiscal resilience while supporting economic reform momentum.
Pakistan reports first Congo virus death of 2025 in Karachi
- Virus is transmitted through tick bites or direct contact with blood of infected animals
- Pakistan’s southwestern province of Balochistan reported 23 Congo virus cases in 2024
KARACHI: A 42-year-old man lost his life after contracting the Crimean-Congo Hemorrhagic Fever (CCHF), marking the first confirmed fatality from the virus in Pakistan’s southern Sindh province this year, the health department said on Wednesday.
The fatality rate for the Congo virus ranges from 10 percent to 40 percent, depending on the quality of health care, timeliness of treatment and the patient’s overall health, according to the World Health Organization.
The virus, which is endemic in parts of Africa, Europe and Asia, is primarily transmitted through tick bites or contact with the blood or tissues of infected animals.
“First case of Congo virus [has been] reported in Sindh,” the Sindh Health Department said in a statement on Wednesday.
“42-year-old male was a resident of District Malir,” it continued. “The test report came out positive on June 16 and the patient passed away on June 17.”
Pakistan’s southwestern Balochistan province reported 23 Congo virus cases in 2024, with five deaths since January last year.
Local medical practitioners said most cases were diagnosed during the summer, when the likelihood of the virus spreading increases, particularly around the Eid Al-Adha festival.
The Islamic holiday, marked by the mass slaughter of animals, typically leads to greater human-animal interaction and exposure to infected livestock.
Pakistan witnessed its first case of Congo virus in 1976 and remained a major victim for years, according to the National Library of Medicine.
The country faces major challenges in combating Congo virus every year due to its specific geographical position and a majority of the population being involved with animal husbandry, it added.
There is no approved vaccine for its prevention.
The European Medicines Agency in May 2024 approved a Phase I clinical trial in Sweden for a DNA-based vaccine candidate, N-pVAX1, targeting the Congo virus.
Separately, the University of Oxford in August 2023 launched a Phase I trial of its ChAdOx2 CCHF vaccine, based on the Oxford/AstraZeneca Covid-19 platform, to assess safety and immune response.
Pakistan rescues injured Indian sailor amid post-war tensions with New Delhi
- Pakistan evacuates the injured sailor from a Liberian-flagged tanker with an all-Indian crew
- Rare humanitarian gesture follows recent Pakistan-India war amid strained diplomatic ties
ISLAMABAD: Pakistan on Wednesday evacuated an injured Indian sailor from an oil tanker in the Arabian Sea, in a rare humanitarian gesture weeks after the two countries fought a brief four-day war that further strained already tense relations.
The medical evacuation was coordinated by the Pakistan Navy’s Joint Maritime Information and Coordination Center (JMICC), which received a distress call from the Liberian-flagged oil and chemical tanker MT HIGH LEADER, carrying an all-Indian crew.
The Pakistan Maritime Security Agency (PMSA) deployed a vessel and transferred the injured crew member to a hospital in Karachi for emergency treatment.
“The successful medical evacuation is yet another testament to the operational readiness and responsiveness of Pakistan’s maritime safety apparatus,” the Pakistan Navy said in a statement.
“The swift execution reflects Pakistan Navy’s resolve to fulfill its international obligations for the safety of life at sea, irrespective of the nationality of the seafarers involved,” it added.
The incident comes at a time of high diplomatic friction between the two nuclear-armed neighbors.
Last month’s military confrontation, involving missile, drone and artillery exchanges, marked one of the most serious escalations in recent years.
Pakistan has repeatedly called for the revival of a composite dialogue process to resolve long-standing issues, including the Kashmir dispute, cross-border militancy and a water-sharing arrangement under the Indus Waters Treaty.
India, however, has resisted any engagement so far.
The JMICC, which coordinated the evacuation, serves as Pakistan’s central maritime emergency response hub and regularly liaises with both national and international stakeholders.
Pakistan reduces sales tax on imported solar panels from 18 % to 10 % amid parliamentary pushback
- The government proposed 18% GST on imported solar panels during budget 2025-26
- Pakistan imported 17 gigawatts of solar panels in 2024, twice the previous year’s volume
ISLAMABAD: Pakistan’s Deputy Prime Minister Ishaq Dar on Wednesday said the general sales tax (GST) on imported solar panels had been reduced from 18% to 10% for the current year, following concerns raised by a parliamentary finance body.
The Senate Standing Committee on Finance and Revenue had urged the government a day earlier to withdraw the proposed 18% GST on imported solar panels, noting that some stakeholders had begun stockpiling equipment ahead of the federal budget to avoid the new levy.
The country’s proposed federal budget for the 2025-26 fiscal year included an 18% GST on the import and local supply of solar panels and related equipment, prompting concern from industry stakeholders and clean energy advocates.
Pakistan imported 17 gigawatts (GW) of solar panels in 2024, twice the volume recorded the year before, to meet rising consumer demand, according to the Global Electricity Review 2025.
“The 18 percent on top of 46% was an additional burden,” Dar told the National Assembly.
“So, regarding this, after consultations and deliberations, we have decided that this year we will keep a 10% sales tax and not 18%.”
Dar highlighted how this was the most debated subject after the budget was announced.
He also explained that around 46% of components used in solar installations in Pakistan were imported while the remaining 54% including inverters and other equipment were locally sourced and already subject to standard taxation.
Solar energy has supplied 25% of Pakistan’s grid electricity so far this year, placing the country among fewer than 20 globally that generate at least a quarter of their monthly power from solar farms.
Industry stakeholders and clean energy activists had warned that the added cost in tax could slow the rapid adoption of rooftop solar systems by households and businesses, potentially undermining national targets for expanding the share of renewables in the country’s energy mix.
Pakistan increased its solar electricity generation at a rate more than three times the global average in 2025, driven by a surge in solar capacity imports that were over five times higher than in 2022, according to data from Ember, a UK-based energy think tank.
This rapid growth in both capacity and output has propelled solar energy from being the country’s fifth-largest power source in 2023 to the top spot in 2025.
