Pakistan has assured the International Monetary Fund (IMF) that it is prepared to tighten monetary policy, including raising interest rates, if inflationary pressures increase due to the economic fallout from ongoing tensions in the Gulf region. The commitment reflects Islamabad’s efforts to maintain macroeconomic stability amid rising global uncertainty.
According to officials, Pakistan informed the Washington-based lender that it would maintain a strict monetary stance in the coming months while closely monitoring global food and fuel price movements and their impact on domestic inflation. Authorities indicated that borrowing costs could be increased if price pressures intensify.
The assurance follows the State Bank of Pakistan’s recent decision to keep the benchmark policy rate unchanged earlier this month after regional geopolitical tensions escalated. Previously, the central bank had reduced interest rates by 50 basis points in December 2025, citing improved conditions following reduced flood-related economic risks.
Pakistan also reiterated that exchange-rate flexibility would remain a central policy tool to absorb external shocks. Officials emphasized that allowing the currency to adjust according to market conditions would help manage pressures arising from Middle East instability and protect the country’s external financial position.
Authorities further pledged to ensure that balance-of-payments constraints do not disrupt import financing or external payments. The government and the central bank also committed to improving transparency by providing clearer guidance on policy decisions and risk assessments in Monetary Policy Committee statements and meeting minutes by June 2026.
In addition, Islamabad informed the IMF that it plans to publish semi-annual foreign-exchange reserve targets and gradually ease foreign-exchange restrictions under a reform roadmap extending through March 2027. The strategy includes shifting from pre-transaction verification toward risk-based post-transaction supervision to improve efficiency in the interbank currency market.
Separately, Pakistan pledged to prepare an action plan by May 2026 to address rising costs associated with processing workers’ remittances through banks and exchange companies. Authorities said a new mechanism would ensure subsidy claims under remittance incentive schemes remain within approved annual budget allocations following previous overruns.
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