KARACHI (Dunya News) – The State Bank of Pakistan’s Monetary Policy Committee (MPC) has reduced the policy rate by only 1 percentage point — from 12% to 11% — since January 2025, maintaining one of the highest real interest rates in the region at around 8.5% on average over the past year.
This cautious monetary approach has resulted in an estimated Rs 3 trillion in additional interest payments on the government’s Rs 50 trillion domestic debt, putting further pressure on public finances.
The Monetary Policy Committee of the State Bank has reduced interest rates by only 1 percentage point — from 12% to 11% — since January 2025. The 12-month average real interest rate has remained around 8.5%.
As a result, approximately Rs 3 trillion in excessive interest payments… pic.twitter.com/8Hm8YdbYAd
— Economic Policy & Business Development (@EPBDT) November 7, 2025
Economists warn that such high-interest-rate policies are inflating government borrowing costs, discouraging private sector investment, and pushing the state toward heavier taxation — a cycle that slows economic growth while increasing debt dependency.
In a striking comparison, the Rs 3 trillion spent on extra interest payments to contain inflation surpasses Pakistan’s entire defence budget, underscoring the fiscal burden created by tight monetary policy.
Analysts emphasize the need for a balanced approach to monetary easing to stimulate growth without reigniting inflationary pressures.
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