SBP rate hike is the need of the hour

Summary October 27, 2026The State Bank of Pakistan (SBP) has raised its benchmark interest rate by 50 basis points to 12 per cent, citing rising energy and food prices and growing uncertainty caused by tensions in the Middle East. This is the first rate hike since June, taking the policy rate from 11.5 per cent to 12 per cent. Pakistan's economy is expected to grow by 3.5 to 4.5 per cent during the current fiscal year. AI Generated Summary October 27, 2026 The State Bank of Pakistan (SBP) has raised its benchmark interest rate by 50 basis points to 12 per cent, citing rising energy and food prices and growing uncertainty caused by tensions in the Middle East. The decision is understandable in the present circumstances, but it will also increase the cost of borrowing and put further pressure on businesses and households. SBP Governor Jameel Ahmad announced the decision on Monday after a meeting of the Monetary Policy Committee in Karachi. Nine of the committee's 10 members voted in favour of the increase. This is the first rate hike since June, taking the policy rate from 11.5 per cent to 12 per cent. The decision comes at a difficult time for Pakistan's economy. The country depends heavily on imported energy, making it vulnerable to international price increases and regional conflicts. Higher oil prices can raise transport costs, electricity generation expenses and the cost of producing and delivering goods. These increases eventually reach ordinary consumers. In these circumstances, the SBP's decision is the need of the hour. The central bank must take steps to prevent inflation from becoming more severe and to protect economic stability. However, a higher interest rate is not without consequences. It makes business loans more expensive, discourages investment and can slow economic activity. Small businesses, industrial units and people seeking loans are likely to face additional difficulties. Pakistan's economy is expected to grow by 3.5 to 4.5 per cent during the current fiscal year. Maintaining this growth while controlling inflation will require careful decisions by both the central bank and the government.