The State Bank of Pakistan kept its benchmark policy rate unchanged at 10.5% in March, as expected, extending the pause in its easing cycle. Policymakers cited heightened economic uncertainty as oil prices surged amid escalating tensions in the Middle East. Pakistan remains particularly vulnerable to rising energy costs due to its heavy reliance on imported fuel. A prolonged energy shock could also pressure the rupee and complicate the country’s commitments under its IMF stabilization program. Analysts warn the recent fuel price increase could push inflation to around 9.25% in the second quarter, with headline inflation having risen to 7% in February, the highest since October 2024. Meanwhile, the government’s 4.2% GDP growth target for the fiscal year ending July is becoming increasingly challenging amid the Middle East crisis, severe monsoon floods that displaced roughly three million people, and supply-chain disruptions linked to clashes with Afghanistan.
