Pakistan has assured the International Monetary Fund (IMF) that it will maintain a tight monetary stance, including raising interest rates if necessary, to counter rising inflationary pressures linked to the ongoing Gulf conflict, The News reported.
According to official sources, the government has committed to keeping spending within budget limits and avoiding fiscal overruns. It has also pledged to prepare an action plan to address the increasing costs of routing remittances through banks and exchange companies.
The government and the State Bank of Pakistan (SBP) informed the IMF that monetary policy would remain restrictive in the coming months. Officials said they were prepared to increase interest rates if required.
The central bank had previously lowered the policy rate by 50 basis points in December 2025 following a decline in flood-related risks. However, the SBP’s Monetary Policy Committee (MPC) kept the policy rate unchanged in its March 9, 2026 meeting due to emerging regional tensions. Authorities said they are closely monitoring global food and fuel price volatility and its impact on domestic inflation.
Pakistan has also committed to strengthening its monetary policy framework and improving communication. By June 2026, the authorities will review how MPC statements and minutes can better reflect policy stance and risk assessments.
On exchange rate policy, Islamabad reaffirmed its commitment to maintaining flexibility, describing it as a key mechanism to absorb external shocks, including spillovers from regional conflicts. The government said it would ensure that balance of payments pressures do not disrupt timely import financing and other external payments.
Officials added that a well-functioning interbank foreign exchange market is essential for rebuilding foreign reserves. To improve transparency, Pakistan plans to publish semi-annual reserve targets, while continued foreign exchange interventions will help guide market expectations.
The government has also begun removing regulatory burdens on banks and customers, including easing certain documentation requirements. Authorities said this marks a shift from pre-transaction verification to a risk-based post-transaction supervision model.
The SBP is developing a roadmap for the gradual removal of foreign exchange restrictions under a new structural benchmark expected by March 2027. The roadmap will outline macroeconomic and financial stability conditions required for each phase of liberalization.
Additionally, the government plans to address structural inefficiencies in the remittance system to encourage inflows. A comprehensive assessment of costs and constraints is expected by May 2026, after which an action plan will be finalized.
The Finance Ministry and the SBP will also introduce a mechanism to ensure that remittance subsidy claims remain within the allocated fiscal budget, addressing previous instances of budget overruns.