Pakistan holds key rate at 11 percent as Mideast conflict overshadows growth push

Pakistan holds key rate at 11 percent as Mideast conflict overshadows growth push
The emblem of the State Bank of Pakistan during a news conference in Karachi, Pakistan, on Monday, Jan. 23, 2023. (Getty Images/ File)
Short Url
Updated 16 June 2025

Pakistan holds key rate at 11 percent as Mideast conflict overshadows growth push

Pakistan holds key rate at 11 percent as Mideast conflict overshadows growth push
  • Central bank maintains cautious stance as heightened geopolitical tensions, volatile global oil prices add new inflation risks 
  • Bank paused its easing cycle in March, following cumulative cuts totaling 1,000 basis points from a record high of 22 percent

ISLAMABAD: Pakistan’s central bank kept its key policy rate unchanged at 11 percent on Monday, maintaining a cautious stance as heightened geopolitical tensions and volatile global oil prices add new risks to inflation and the fragile external sector.

A Reuters poll released earlier on Monday had shown analysts revising their expectations for a rate cut in light of Israel’s military strikes on Iran that began on Friday and have since intensified, pushing up global commodity prices.

“The [Monetary Policy] Committee noted some potential risks to the external sector amidst the sustained widening in the trade deficit and weak financial inflows. Moreover, some of the proposed FY26 budgetary measures may further widen the trade deficit by increasing imports,” the central bank said, announcing its decision to leave the rate unchanged.

“In this regard, the Committee deemed today’s decision appropriate to sustain the macroeconomic and price stability.” 

Inflation in Pakistan has slowed markedly since peaking at around 40 percent in May 2023. However, last month it rose to 3.5 percent year-on-year, above the finance ministry’s projection of up to 2 percent, partly due to the fading of favorable base effects. The central bank projects average inflation between 5.5 percent and 7.5 percent for the fiscal year ending this month.

The bank paused its easing cycle in March, following cumulative cuts totaling 1,000 basis points from a record high of 22 percent, and resumed it with a 100-basis-point reduction in May.

Monday’s meeting came days after the government presented a tight annual budget, which increased defense spending by 20 percent but reduced overall expenditure by 7 percent. It projects GDP growth at 4.2 percent for the next fiscal year, up from a provisional estimate of 2.7 percent for the current year.

The MPC noted that despite the widening trade deficit, the current account remained broadly balanced in April, and foreign exchange reserves rose to $11.7 billion as of June 6 after the completion of the first review under the International Monetary Fund’s Extended Fund Facility.

Revised budget estimates show the primary surplus at 2.2 percent of GDP for FY25, up from 0.9 percent last year, with a higher target of 2.4 percent for the upcoming fiscal year.

Global oil prices have rebounded sharply, driven by the evolving Middle East crisis and some easing of US-China trade tensions, the MPC noted.

“Taking stock of these developments and potential risks, the Committee assessed that the real interest rate remains adequately positive to stabilize inflation within the target range of 5–7 percent,” the statement said.

It added that timely foreign inflows, planned fiscal consolidation, and structural reforms remained essential to maintain macroeconomic stability and achieve sustainable growth.


Pakistan launches third Chinese-built Hangor-class submarine amid deepening defense ties

Pakistan launches third Chinese-built Hangor-class submarine amid deepening defense ties
Updated 4 sec ago

Pakistan launches third Chinese-built Hangor-class submarine amid deepening defense ties

Pakistan launches third Chinese-built Hangor-class submarine amid deepening defense ties
  • The launch comes months after Pakistan’s brief but intense military standoff with India
  • Eight-submarine deal includes technology transfer, with four vessels to be built in Pakistan

KARACHI: Pakistan on Friday launched its third Hangor-class submarine in China, the navy said in a statement, in the latest sign of the country’s growing military ties with Beijing.

The launch comes months after Pakistan’s brief but intense military standoff with India, which saw the two nuclear-armed neighbors exchange air, missile, drone and artillery attacks.

In recent years, Islamabad has strengthened its defence collaboration with China, inducting state-of-the-art Chinese hardware across all three services, including Z-10ME attack helicopters earlier this month and JF-17 fighter jets jointly developed with Beijing.

The navy said the new vessel, equipped with modern sensors and weapons, will enhance its capabilities to safeguard national interests and contribute to a “secure and cooperative maritime environment.”

“Their cutting-edge weaponry and advanced sensors would be instrumental in sustaining regional power equilibrium and ensuring maritime stability,” Vice Admiral Abdul Samad, Deputy Chief of Naval Staff Project-2, said at the launch ceremony in Wuhan, according to a navy statement.

The launch took place at Wuchang Shipbuilding Industry Group’s Shuangliu Base and was attended by senior officials from both Pakistan and China, including representatives of China Shipbuilding & Offshore International Company Ltd (CSOC).

Samad commended the steady progress of the project, praised the work of Chinese shipbuilders and said the Hangor-class program would “bring a fresh dimension” to Pakistan-China naval cooperation.

The submarines are a new generation of diesel-electric attack vessels and equipped with advanced sensors and modern weapon systems to strengthen the country’s underwater warfare capabilities.

Pakistan signed a contract with CSOC to acquire eight Hangor-class submarines. Four are being built in China, while the remaining four will be produced in Pakistan at Karachi Shipyard & Engineering Works Limited under a transfer-of-technology program.

The first two submarines in the series were launched in 2024, with deliveries expected over the next several years.


Pakistani tribunal upholds ruling against Gulf-bound worker medical centers for price fixing

Pakistani tribunal upholds ruling against Gulf-bound worker medical centers for price fixing
Updated 15 August 2025

Pakistani tribunal upholds ruling against Gulf-bound worker medical centers for price fixing

Pakistani tribunal upholds ruling against Gulf-bound worker medical centers for price fixing
  • Competition appeals tribunal reduces fines but upholds ruling against price fixing by medical centers
  • Pakistani workers going to Gulf must use approved clinics, where CCP found collusion, overcharging

ISLAMABAD: Pakistan’s competition appeals tribunal has upheld a ruling against 20 medical centers and laboratories that colluded to fix prices and allocate customers for mandatory pre-departure health tests of workers bound for Gulf countries, the competition regulator said on Friday.

The case involves a captive market of low-income Pakistani laborers headed mainly to , Qatar, Oman, Bahrain and Kuwait.

Under the rules, these workers must undergo tests at centers approved by the Gulf Approved Medical Centers Association (GAMCA), a network of clinics authorized by Gulf states to carry out the mandatory checks.

The regulator found the centers and their five regional associations divided customers on a rotational basis, eliminating competition on price and service quality, and in some cases charging for unnecessary repeat tests.

“The CCP’s investigation concluded that fee fixation, territorial division and equal allocation of customers by GAMCAs violated the Competition Act, 2010,” the Competition Commission of Pakistan (CCP) said in a statement.

“Any anti-competitive conduct will be dealt with strictly under the competition law,” it quoted its chairman, Dr. Kabir Sidhu, as saying.

The competition appeals tribunal upheld the findings but reduced the penalties from 20 million rupees ($70,000) per medical center and 10 million rupees ($35,000) per GAMCA to 2 million rupees ($7,000) percenter and 1 million rupees ($3,500) per GAMCA.

The CCP launched its inquiry after a complaint from the Pakistan Overseas Employment Promoters Association, which represents manpower exporters.


Pakistan signs financial advisory deal to privatize state-owned agricultural bank

Pakistan signs financial advisory deal to privatize state-owned agricultural bank
Updated 15 August 2025

Pakistan signs financial advisory deal to privatize state-owned agricultural bank

Pakistan signs financial advisory deal to privatize state-owned agricultural bank
  • IMF has urged Pakistan to privatize loss-making or under-performing state firms to ease pressure on public finances
  • Government hopes private investment will modernize agricultural finance and help farmers adopt new technologies

ISLAMABAD: Pakistan has signed a financial advisory services agreement to begin the strategic privatization of Zarai Taraqiati Bank Limited (ZTBL), the country’s largest state-owned agricultural lender, the privatization commission said on Friday.

The move comes as Islamabad faces pressure to privatize loss-making or under-performing state-owned enterprises under International Monetary Fund loan agreements in recent years.

The government expects the sell-off drive to improve efficiency by putting such entities under competitive, corporate management.

ZTBL’s privatization comes at a time when Pakistan is striving to bolster food security in the face of extreme climate patterns by modernizing agricultural finance, helping farmers adopt new technologies and practices critical for boosting yields and resilience.

“The privatization of ZTBL is designed to catalyze investment in Pakistan’s agricultural future by combining private sector efficiency with the bank’s long-standing expertise in agricultural finance,” the commission said in a statement. “The goal is to ensure farmers have timely access to essential financial resources.”

It signed the financial advisory services agreement with a consortium led by Next Capital Limited.

ZTBL operates a network of more than 500 branches nationwide, providing credit to small farmers and rural communities.

Officials said private investment was expected to expand the bank’s product range, introduce modern banking technologies, improve governance and strengthen customer service.

Under the newly signed agreement, advisers will conduct due diligence, market sounding and investor engagement, as well as structure and market the transaction and assist in a transparent bidding process.


Pakistan, US step up investment talks, move toward joint counterterrorism plan

Pakistan, US step up investment talks, move toward joint counterterrorism plan
Updated 15 August 2025

Pakistan, US step up investment talks, move toward joint counterterrorism plan

Pakistan, US step up investment talks, move toward joint counterterrorism plan
  • Finance minister says new US tariff deal will unlock investment in mines, minerals, IT and energy sectors
  • Interior minister hails US move to blacklist Baloch separatist groups, eyes joint counterterrorism strategy

KARACHI: Senior Pakistani and US officials on Friday discussed next steps in economic investment and the development of a joint counterterrorism strategy in meetings aimed at deepening economic and defense ties between the two countries.

Pakistan’s commerce ministry said earlier this week it had finalized a strategy to implement a recently negotiated tariff deal with the United States that Islamabad hopes will unlock US investment.

Announced last month, the agreement set a reduced tariff rate of 19 percent on Pakistani imports — the lowest in the region — and is expected to revive bilateral trade while opening the way for US firms to participate in various Pakistani economic sectors.

In talks with US Chargé d’Affaires Natalie Baker in Islamabad, Finance Minister Muhammad Aurangzeb said Pakistan’s economy had “turned a corner” after a prolonged downturn, a shift recognized by three major international rating agencies.

“The Minister emphasized that the [trade] agreement would usher in a new era of economic collaboration — particularly in energy, mines and minerals, IT, cryptocurrency and other sectors — while expanding market access, attracting investment and fostering cooperation in areas of mutual interest,” the finance ministry said in a statement released after the meeting.

“He expressed hope that the deal would lead to increased US investment in Pakistan’s infrastructure, development projects and digital and mining sectors, which were ready for tangible action and progress,” it added.

Aurangzeb thanked Washington for its continued economic and development support and recalled recent meetings in the US with senior officials to finalize the trade deal.

In a video message after last month’s announcement, he had noted Pakistan’s goal was always to move “beyond the immediate trade imperative,” calling the US-Pakistan pact “a real win-win situation” for both nations.

Pakistan, he added, had “come a long way” in its overall strategic partnership with the US.

COUNTERTERRORISM PLAN

Separately, Interior Minister Mohsin Naqvi met US Coordinator for Counterterrorism Gregory LoGerfo in Islamabad to discuss closer cooperation to fight militant violence, and to work jointly on border security and anti-narcotics efforts.

Pakistan and the US have shared a defense relationship dating back to the Cold War era, collaborating over decades on regional stability and counterinsurgency in Afghanistan.

The latest talks between Naqvi and LoGerfo came days after Washington designated the separatist Baloch Liberation Army (BLA) and its Majeed Brigade faction as “terrorist” organizations.

Both have carried out coordinated attacks in Balochistan targeting security personnel, civilians and foreign nationals working on major development projects.

“Naqvi added that counterterrorism dialogue will help in creating a joint strategy,” the interior ministry said in a statement. “He termed the US decision to designate the banned BLA and banned Majeed Brigade as Foreign terrorist organizations a commendable step, expressing hope that Pakistan-US cooperation will yield positive results in eliminating terrorism.”

Naqvi also noted that bilateral ties had improved since President Donald Trump took office, citing transparency, mutual trust and cooperation as the hallmarks of the relationship and called it an opportune time to strengthen engagement in all areas.


India says international court lacks authority to rule on Pakistan water treaty

India says international court lacks authority to rule on Pakistan water treaty
Updated 15 August 2025

India says international court lacks authority to rule on Pakistan water treaty

India says international court lacks authority to rule on Pakistan water treaty
  • India does not recognize the Court of Arbitration’s jurisdiction over the Indus Waters Treaty
  • Pakistan has hailed ruling backing its position on Indian hydro-power projects on western rivers

NEW DELHI: The international Court of Arbitration lacks any legal authority to make pronouncements on the Indus Waters Treaty between India and Pakistan as New Delhi has never recognized the legitimacy of the court, India’s foreign ministry said on Thursday.

A ruling from the Court of Arbitration last week backed Pakistan by saying that India must adhere to the Indus Waters Treaty in the design of new hydro-electric power stations on rivers that flow west into Pakistan.

Under the 1960 Indus Waters Treaty, three rivers that flow westwards were awarded to Pakistan, with India getting three eastern flowing rivers. Pakistan fears its neighbor India could choke its main water supply, with 80 percent of the country’s agriculture and hydro-power dependent on those three river flows.

In 2023, Pakistan brought a case to the Hague-based Permanent Court of Arbitration over the design of Indian hydro-power projects on rivers that were awarded to Pakistan under the treaty.

The court, in a ruling on Friday that was posted on its website on Monday, said it had jurisdiction over the dispute and ruled the treaty “does not permit India to generate hydro-electric power on the Western Rivers based on what might be the ideal or best practices approach for engineering” of these projects.

Instead, the design of these projects must adhere “strictly” to the specifications laid down in the treaty, the court said.

Pakistan’s Attorney General, Mansoor Usman, said in an interview on Tuesday that, by and large, the court had accepted Pakistan’s position, especially on the design issue of the new hydropower projects.

“I am sure it is clear now that India cannot construct any of these projects in violation of the court’s decision,” he told Reuters.

Pakistan’s foreign ministry said late Monday that the court ruling said that India had to “let flow” the waters of the three rivers for Pakistan’s unrestricted use.

The court said its findings are final and binding on both countries, according to the foreign office statement.

An Indian official pointed to a June statement by India’s foreign ministry, which said that India has never recognized the existence in law of the Court of Arbitration.

Tensions between the two countries over the Indus Waters Treaty soared when India unilaterally said in April that it would hold the treaty in abeyance in response to the killing of 26 civilians in Indian-controlled Kashmir, an attack it blamed on Islamabad. Pakistan denied involvement. Conflict then erupted in May, the most serious fighting between the two countries in decades, before it ended with a ceasefire announcement by US President Donald Trump.