ISLAMABAD: Stan­d­a­­rd & Poor’s Global Market Intelligence on Tuesday fo­­recast further rate cuts by the State Bank of Pakistan (SBP) during the current fiscal year following a 100bps reduction to 11pc by the Monetary Policy Committee on Monday.

In a brief analysis, S&P Global Market Intelligence said the SBP delivered a larger-than-expected rate cut to 11pc as headline inflation bottomed out.

“Given improved inflation dynamics and stronger external balances, the SBP now has space to ease further, and S&P Global Mar­ket Intelligence projects an­­other 100bps cut by the end of 2025,” it said, adding, however, that the central bank was expected to proceed cautiously due to global volatility, including the impact of US tariffs and softening external demand.

It said the S&P Global-HBL Pakistan Manu­fac­turing Performance Ma­­nagers’ Index (PMI) for March showed that domestic production continued to grow, and new export ord­ers contracted for the first time since the survey began in May 2024. Price pressures picked up, with firms citing higher input and energy costs. “This could push output prices higher in the coming months and mildly lift headline inflation, which bottomed out in April and is projected to rise modestly in the coming months due to seasonal demand and energy adjustments”.

The S&P projected the SBP reserves to be on track to reach $14 billion by the end of June. However, gross financing needs remain elevated at around $27bn annually. Even after regular rollovers, over $8bn in residual external debt rep­ayments are due in FY25 and $9bn in FY26.

Progress on the IMF programme and inflows from traditi­o­nal bilateral partners and multilateral institutions will remain essential to bridge this financing gap. $16bn of repayments have been rolled over for fiscal year 2025, and $1.3bn–$1.5bn is due in the rem­a­ining months, which is projected to be met, it observed.

Published in Dawn, May 7th, 2025