Arif Habib Limited has advised the State Bank of Pakistan to keep the policy rate unchanged at 10.5% in the upcoming April 2026 Monetary Policy Statement. The brokerage argues that recent inflation spikes are supply-driven and temporary, not signs of demand overheating.
Global oil volatility has been the main culprit. Arab Light surged to ~USD 135/bbl, then fell to ~USD 102/bbl, and briefly touched ~USD 77/bbl. This uncertainty has filtered into domestic transport inflation, which jumped 12% MoM in March and is expected to rise ~15% in April.
Patience over impulse
Yet broader inflation remains anchored. March CPI edged up to 7.3% YoY, keeping the FY26 average at a comfortable 5.67%. Core inflation is contained at 8%. Any move toward double digits in 4QFY26 is largely a base-effect story, not demand-led pressure.
“Responding to such temporary pressures with policy tightening risks overcorrection,” the note warns. With GDP growing at 3.89% in 2QFY26 and 3Q expected to be weaker due to conflict spillovers, a rate hike could harm the fragile recovery.
External buffers remain strong
Pakistan posted a USD 1.07bn current account surplus in March 2026, the highest in a year. Remittances are robust, and the trade deficit has narrowed. Even with oil near USD 100/bbl, the FY26 current account deficit is projected at just ~USD 1.6bn.
FX reserves stand at USD 15.1bn, excluding a fresh USD 1bn Saudi inflow. Saudi Arabia also provided USD 3bn in new deposits and extended a USD 5bn facility. A USD 1.2bn IMF tranche is pending, while Pakistan recently raised USD 750mn via a Eurobond.
Market expects no change
An AHL survey shows 61% expect no rate change, while 19% anticipate a 50bps hike. The firm concludes that patience is prudent, with the June policy alongside the federal budget offering a clearer recalibration window.