Finance minister notes ‘room’ for lowering interest rate by year end
ISLAMABAD — Pakistan’s finance minister, Muhammad Aurangzeb, said on Wednesday that there could be some room to cut the country’s policy interest rate before the end of the year.
The central bank has kept the rate at 11 percent since May, after bringing it down from 22 percent since June 2024 in a series of steps. Many in the business community had been hoping for faster relief, according to some industry representatives.
“Speaking at an event in Islamabad, Aurangzeb stressed that the decision on interest rates rests with the State Bank of Pakistan and its Monetary Policy Committee. He said there’s room to lower the rate slightly and added that, looking at both average and core inflation, there’s space for easing. Beyond that, he highlighted broader progress over the past 18 months, pointing to growth in per capita income, improved economic stability, higher foreign reserves, increased remittances, and a shrinking fiscal deficit.”
Aurangzeb praised efforts to make taxation more competitive and expand the tax base, pointing out that international agencies have recognized Pakistan’s reforms. Fitch and S&P had upgraded the country’s ratings this year, and he expressed optimism that Moody’s could consider a similar move in the future.
Aurangzeb also highlighted ongoing government reforms, such as adjusting tariffs to cut raw material costs, streamlining ministries and departments, and accelerating the privatisation of state-owned companies.
Trade developments were also on his agenda. He welcomed a recent U.S. agreement reportedly reducing tariffs from 29 percent to 19 percent, calling it a major opportunity for exporters. “It’s important that we, as government, reach out to businesses directly,” he said, recalling his own private sector experience.
On the domestic front, Aurangzeb highlighted a healthy uptick in economic activity: textile, IT, and pharmaceutical exports are growing strongly, SME loans have risen 41 percent, and agricultural loans have topped Rs2.5 trillion. Private sector lending is also on the rise. He stressed that as fiscal discipline improves, government borrowing will fall, freeing banks to support businesses further.
The minister noted record activity at the Pakistan Stock Exchange, which recently crossed 147,000 points, and said more than 65,000 new investors joined over the past year. Company registrations also exceeded 250,000 annually, indicating a deeper structural shift in the economy.
